HIKE IN PETROL PRICES

State-owned oil companies today hiked petrol prices by Rs 3.14 per litre as a fall in rupee increased the cost of importing the crude oil. Every rupee depreciation, the under-recovery (revenue loss) increases annually by around Rs 9,000 crore. The depreciation in the rupee should be not be any reason to increase petrol prices especially when crude oil prices are range bound to stable over the past two months. In my view oil companies must have hedged their US dollar payments when usd/inr was trading around 45.0. Short term currency depreciation should not be used as an excuse to increase petrol prices and hurt the common man. Since June 2010 petrol prices have been increased by nearly thirty eight percent. One should expect further slowdown in India’s growth. Consumer durables sector will be the worst hit before the festival season which starts from 28 th of this month.
PETROL PRICE HIKES IN 2011 Rs.paisa 26TH JUNE 2010 21ST SEPTEMBER 2010 17TH OCTOBER, 2010 9TH NOVEMBER 2010 16TH DECEMBER 2010 15TH JANUARY 2011 15TH MAY 2011 15TH SEPTEMBER 2011 3.50 0.27 0.72 0.32 2.96 2.52 5.00 3.14

We have the general election in the next two years. People of India should vote for people who can reduce prices or stabilize prices and not in the ever increasing mode. The current UPA government is a big failure for the common man.

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diesel retails at Rs 43 per liter whereas petrol comes in at a slightly lower Rs 41 per liter. The reason behind it is that every household in India now has atleast a bike if not a car. However. This would rather be the first cause where all Indians are voicing their opinion and are unanimous about it. keeping in mind the government's concerns on inflation which climbed to 9. History Starting with 2001. they would be using the public transport. Even if they don’t have a vehicle at home. which may not be much. Strange. Sensing a fuel hike. It must however be noted that its only the people with American origin who complain and not everyone out there. petrol is available at a slightly lower rate than diesel. there would also be a price hike in the travel fares.78 percent in August. however in the longer run would definitely affect many. A recent report by the Empowered Group of Ministers or EGoM said that diesel prices are also said to increase in the near future at a rate of Rs 4 per liter. which is said to increase till Rs 70 in the coming months and not years. 2 . In the US. This. petrol price has not moved in tandem with its cost. For the records. Fuel price hike means that it would grossly affect the calculations that a middle class person has in mind while buying a vehicle.The government had in June last year decontrolled petrol price but continues to dictate diesel. it went upto Rs 34 per liter in 2004 and then increased to Rs 50 something in 2007. However many would have heard or even read that the Americans make a hue and cry about the rising fuel prices. domestic LPG and kerosene rates. Now it stands at an astounding Rs 64. That’s something which can be called as amazing and really silly. when petrol used to be priced at around Rs 26 per liter. we are being told is because oil companies want to align the prices of petrol from the domestic market with that of the international one.

For the average or comparison sakes. It depends on how fuel the country as a whole produces or requires and whether the so called country is a part of OPEC. a 31 per cent increase over the last fiscal (2010-11). The Indian basket of crude oil averaged USD 106. it has averaged USD 111. As far as salary goes. a person living in the United States earns approximately Rs 23 lakhs while for the one staying in India is only Rs 40k.Migrants like the Chinese and Indians still buy cars in large numbers and are very happy about the price that they pay for the fuel and stuff. 3 .94 per barrel in August and USD 110. From April-September. Petrol price were last hiked by Rs 5 per litre on May 15. obviously the people living in North America earn far more than what we do out here.09 per barrel in 2010-11. Reason for Hike The basket of crude oil that India buys had averaged USD 85. Well but then fuel supplying agencies rarely charge fuel prices based on the average income or stuff.88 a barrel in September.64 per barrel.

61 per litre due to high international crude oil prices and with rupee touching two-year low against the US dollar. Petrol price was freed from the government control in June last year but the retail rates have not moved in line with cost as high inflation rate forced the oil companies to seek 'advice' from parent oil ministry before revising rates.29 per cent and BSE500 up 0.45 per cent. The broader market also rose with the BSE100 up 0. PFC gained Rs 12. the three firms are losing Rs 263 crore per day on selling diesel. the under-recoveries of oil marketing companies have been increasing during 2011-12 Last week was extremely volatile and one felt at times that the market is behaving illogically.2-kg cylinder.05 a litre. BPCL and HPCL have lost Rs 2.Indian Oil Corp (IOC). 4 .25 per litre while domestic LPG rates are underpriced by Rs 267 per 14. The rupee was weak and closed at Rs 47.084. the losses have increased the cost of importing crude oil.80 points or 0.70 per cent and the BSE Smallcap losing 1. Diesel is being sold at a subsidy of Rs 6.35 per cent to close at Rs 2393. The broader indices were losers with the BSE Midcap losing 0.70 while Infosys gained Rs 122 or 5. Bharat Petroleum Corp (BPCL) and Hindsutan Petroleum Corp (HPCL) now lose Rs 2.60 or 8.86 points or 0. Besides petrol. In individual stocks.49 per cent to close at 5. BSE200 up 0.450 crore this fiscal on selling petrol below the cost.40 per cent to close at 16.51 per cent at Rs 160.21 per cent.25 points. domestic LPG and kerosene below cost. The BSE Sensex gained 66. IOC. The markets lost substantial ground on the opening day of the previous week and then spent the remaining part of the week recovering lost ground. kerosene at Rs 23.27.933.83 points while the NSE Nifty gained 24. The markets finally closed in positive territory with small gains for the week.25 per cent respectively. Due to hardening of crude/petroleum product prices in the international market and depreciation of rupee viz-a-viz dollar.

Out of all the countries in the world. the prices of fuel coming down in India is next to impossible and that is until India itself finds suitable reserves of oil deep down somewhere in the Arabian Ocean. It is said that the government pays about Rs 4 per liter of diesel sold since the government wants diesel to continue with its subsidized agenda.Oil Kings About 40 percentage of the world’s oil supply is governed by the Organization of Petrol Exporting Countries or OPEC. only 13 are a part of it. However there are some car manufacturers who refuse to sell diesel cars in India and the last remaining one is Honda. 5 . So due to this. As the price of petrol increases however more than one third of the cars being sold in India are diesel powered. Other manufacturers who don’t have diesel motors in their lineup are at least introducing in LPG or CNG variants of the same model. All the 13 nations are the ones who control the price of fuel as also its supply and production all over the world. The Government of India pays out of the nose to diesel companies for continuing their fuel supply to the Indian vehicles. Since we Indians rank at number 23 in the list of oil producing countries and hence we are out of OPEC. However the price of diesel is subsidized here so that most of the buyers don’t feel that they are giving in something more to buy the “unclean” fuel.

we would be paying approximately Rs 100 per liter of petrol with diesel coming in at Rs 60 per liter. its Rs 0. In Venezuela. its only Rs 1. there is fatigue in the market.83 points. A case in point would be last Friday.05 for a liter of petrol while for diesel. it is the highest with Rs 76 per liter of petrol and Rs 57 for a liter of black oil. the price of petrol stands at Rs 21 per liter whereas Rs 36 is the rate of diesel. It seems that the market has run out of steam and is struggling to go up.Price Comparison Compare this with fuel prices around the world.54 points and then lost 188. The situation doesn’t look to change in the near future and by the end of 2015. Struggle It would be interesting to point out that though the market has now closed positive for the third consecutive week after being on a losing streak for five consecutive weeks.71 points from that level to close at 16933. Move onto CNG or LPG is our recommendation and you can save yourselves some money as also contribute to a lower polluting atmosphere overall.122.45 for a liter. We use global cues as a reason to become strong and then give up the gains as the day comes to an end. 6 . where the BSE Sensex made a high of 17. UAE has very high oil reserves and even then. However in Brazil.

70. and diesel prices remained unchanged. which were trading at Rs 7 discount to the cash price. Confusion Yet another significant event. The October futures. which has been done on account of the follow-on-offer (FPO). Some more recovery is likely to be seen in the coming weeks due to the arbitrage. I believe this will affect the future divestments from the Government of India (GoI). which happened. There will be a lot of discussion and debate on why the issue was postponed and whether it should have been done or not. One thing however is certain that it sends wrong signals to investors and also tells the world that the Government believes that the Indian markets are in a bad shape and do not have the capacity to collectively absorb a fresh issue of $2. 7 .91 per cent to close at Rs 274.Fuel Petrol prices were raised by a staggering Rs 3.14 per litre. This led to a sharp rise in the prices of the ONGC stock. which is just about 5 per cent. which saw the industrial output tumble to the lowest level in two years. RBI raised repo and reverse repo rates by 25 basis points each. was the selling shareholder (Government of India) deciding to postpone the follow-on public offer (FPO) of ONGC. What came as a surprise was that the issue was postponed. which rose 4. recouped the discount and were trading at par to the cash price. The middle and lower middle class will be hit by this as they are the ones who use two wheelers and cars which run on petrol.4 billion. Inflation rose once again and it might further increase due to hike in petrol prices and rate hike by the RBI. During the previous week Index of Industrial Production (IIP) were released for the month of August 2011.

378 points and finally at 16. There are a couple of issues opening this week which need not be talked about or discussed.25 times. then at 5. In the week beginning September 19. then at 16.664 points.181 points. then at 4. The NSE Nifty has support at 5. then at 5.307.978 points.229 points and finally at 5. which had tapped the markets with its bond issue.068 points.Issues The previous week saw one IPO from SRS listing. These are small issues and are extremely expensive and overpriced. then at 16. The stock closed at Rs 33.608.498.358 and finally at 17. The NCD issue from Manappuram also listed during the week and is trading at a discount to the issue price of Rs 1000. Future The week ahead would be driven by global cues and our markets would be extremely volatile. I believe this share has some more ground to lose and is likely to stabilise around Rs 25. then at 4. Religare Finvest. The company had sold shares at Rs 58 and the issue was subscribed 1. The issue was under pressure and lost substantial ground on day one itself.053 points.204 points. then at 17.735 points. then at 5.911. closed during the week.65.246.841.074. then at 4.806 and finally at 4. then at 17.129 points. 8 . losing 42 per cent on day one. They have weak fundamentals and though they may be subscribed by friendly intermediaries. The market is looking vulnerable and is likely to gain in strength only if it can cross key resistances at 17260 on the Sensex and 5210 on the Nifty. It would be prudent to look at stock specific and buy on sharp dips. The week ahead would see the bond issue from Muthoot Finance listing. The markets need to not only cross the same but thereafter also sustain these levels. then at 16.323 points. the BSE Sensex has support at 16. then at 17. investors should refrain from being tempted by such issues. It has resistance at 17. It has resistance at 5.

" he said. the latest hike in petrol prices has come into force due to weakening of rupee against the dollar. kerosene and domestic LPG while the government dictates their prices. Official on the sidelines of the company’s press conference post its annual general meeting said that the company has incurred losses to the tune of Rs 25.000 crore to be spent over 9 .562 crore for the June quarter—almost 50% higher Y-o-Y mainly due to selling petroleum products at subsidised rates. BPCL would have been in a better financial position. "We got a cash subsidy of around Rs 10. If not for losing Rs 12.78% in August. The company is currently losing about Rs 4 per litre on diesel. but the oil marketer has a long way to go to before it completely wipes off its losses incurred on diesel.000 crore in the first half of the current calendar year on sale of diesel.000 crore from upstream companies like ONGC and the government—but this could do little to bail us out of a loss making situation.Conclusion The country’s second largest refiner Bharat Petroleum (BPCL) may have offset its under-recoveries to the tune of Rs 1. increasing the cost of crude—as oil refiners import 80% of their crude requirements.000 crore by hiking petrol price by Rs 3 on each litre.2 on a kilogramme of LPG cylinder. kerosene and LPG.290 crore on selling these products. The increase in petrol prices has come after inflation climbed to a 13-month high of 9. This official’s statement can be substantiated by the fact that the company has posted a net loss of Rs 2. This is the ninth increase since petrol prices were deregulated in June 2010. Rs 23 a litre on kerosene and Rs 274 per 14. Yet. However. concerns related to under-recoveries have not deterred BPCL to chalk out an expansion plan for which it has earmarked a capital outlay of Rs 50. Petrol prices have moved up more than 39% since then.

This amount would be used to beef up its refinery. The recent commissioning of its Bina refinery and a portfolio of exploration blocks hold key to BPCL's future success. 10 . while the government gradually takes steps to tackle the petroleum industry's underrecovery problems. The latest price hike in petrol will improve profitability from here on for BPCL.a period of five years. The company is set to benefit from weakening global crude oil prices. The government’s pragmatic approach in terms of market-driven pricing of petro products is going to structure benefit for the company over the longer term. we see BPCL to get in momentum and hence we recommend a buy with target of Rs 705. As for the near term. Long-term investors should consider buying into the scrip. capacity and diversify into new areas including petrochemicals and power.

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