The cost of crude has been averaging $105.4 a barrel so far in May. Brent crude hovered at nearly $100 a barrel on Friday, while the Indian oil basket was priced at $99.69 a barrel. The rupee cost has shot up further due to the currency weakening against the dollar. “Oil companies are purchasing costlier oil and gas from the global market, but selling fuel at lower prices. It is impacting their finances. That’s why the govt reduced the excise duty on petrol and diesel, which is costing it Rs 14,000 crore a month,” Sharma said.Officials said losses were not sustainable indefinitely, especially amid projections that prices would remain elevated for at least four months even if a permanent ceasefire was announced now. While the govt has cut excise duty on petrol (Rs 13 a litre) and diesel (Rs 10), it has limited headroom.
The govt will have to bear the subsidy on domestic cooking gas cylinders.Govt and oil companies will, however, have to decide on the extent of the increase. Besides, a steep rise in petrol prices will stoke headline inflation, with retail inflation currently at 3.4%.G Krishanakumar, the former CMD of Bharat Petroleum, said, “India is going to remain a fossil fuel-dependent economy till a very strong renewable energy base is created. To manage this transition, oil companies need to invest. They cannot do that with weak balance sheets. While the govt has done an excellent job in managing the situation, it can only pad up for some time and there is a need to raise prices. After all, most countries have increased prices since the war started. We can look at innovative ways, such as a daily increase in small amounts, whose impact will not be felt by consumers.”Former HPCL chief SK Surana said, “Companies do have under-recoveries, the earlier it gets settled, the better. But the govt will have to bear in mind the impact on the macroeconomy and consumers.”