- Petrol and diesel prices increased for the fourth time in 11 days by Rs 2.7 per litre
- Cumulative fuel price hikes total Rs 7.5 per litre since May 15 across India
- OMCs face heavy losses due to crude price rise after Strait of Hormuz closure
Petrol and diesel prices have been hiked for the fourth time in just 11 days, as Indian oil marketing companies announcing an average hike of Rs 2.7 per litre on Monday morning.
This comes on the back of a Rs 3 per litre hike on May 15, and a 90 paise hike each on May 19 and May 23, taking the cumulative hike to Rs 7.5 per litre.
Why the hike?
The price hikes for petrol and diesel prices across India is a desperate measure to help OMCs such as Hindustan Petroleum (HPCL), Bharat Petroleum (BPCL) and Indian Oil Corporation (IOC) to cut back on heavy losses they have been bearing since the start of the Iran War.
Due to the closure of the Strait of Hormuz, a key oil supply chokepoint especially a import-dependent country like India, crude prices have skyrocketed. This has directly impacted these OMCs, who had been keeping prices steady for the longest time, bearing heavy losses in the process.
Impact of fuel price hike on OMCs
Petroleum Minister Hardeep Singh Puri had earlier revealed that OMCs have been bearing losses of around Rs 1,000 crore daily and were staring at a loss of Rs 1-1.2 lakh crore in the first quarter of FY27.
These price cuts, therefore, have gone a long way in helping these OMCs recoup some of the losses, with the first hike of Rs 3 per litre helping them cut back on 25% of the daily losses.
Up until the third hike, OMCs have already been able to cut back on Rs 330 crore of daily losses.
According to various analysts, every 50 paise per litre increase in fuel marketing margins is estimated to lift EBITDA by 7% for IOCL, 8% for BPCL and 11% for HPCL.
Keeping that in mind, the recent average hike of Rs 2.7 per litre would help these companies save on an additional Rs 113 crore daily. In total, therefore, OMCs, through the four price hikes in 11 days, would be able to cut back on 44% of losses.
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