While oil public sector undertakings have regularly revised ATF and LPG prices, they have since March 16 kept petrol and diesel prices on hold, ostensibly on account of extreme volatility in the international oil markets.
More importantly, no airline operated between mid-March to May 24 in view of the restrictions placed to check the spread of Covid-19, yet oil companies have continued to revise downward jet fuel prices.
While ATF prices are revised fortnightly, LPG rates are changed once a month. Petrol and diesel prices are revised on a daily basis.
“A major reason for the hike is the rise in ATF prices in the international market. The domestic ATF price is based on a formula. Since February, it was on a downward trend,” said a senior Hindustan Petroleum Corporation executive.
The ATF price in Mumbai was seen at Rs 38,543.48 a kl, while in Kolkata, it was Rs 33,070.56 per kl.
Till February this year, the price of jet fuel was in a higher bracket of Rs 65,000 per kl, which started to decline after international crude oil prices started their downward curve early this year.
In February, the price was seen at Rs 64,323.76 per kl. “Oil-marketing companies (OMCs) follow import parity pricing. In addition, crude oil prices have also increased, touching almost $38 a barrel. This rise in crude oil prices and better demand in ATF have led to an increase in prices,” said K Ravichandran, senior vice-president, ICRA.
A $1 increase in ATF price results in 0.5-0.7 per cent impact on the profit margins of airlines.
OMCs have started revising ATF prices every fortnight since March 22. They earlier followed the monthly average of global prices, but have since started using the trailing fortnightly average.
The hike comes at a time when the Union government has asked airlines to operate 30 per cent of their regular flight schedules. They are, however, running services with an average of 70-100 people on board.
The retail selling price of LPG in the Delhi market for May was, however, reduced from Rs 744 to Rs 581.5 a cylinder for all consumers, in line with a drop in international prices.
“For June, there has been an increase in international prices of LPG. Due to increase in prices in the international market, the retail selling price of LPG in the Delhi market will be increased by Rs 11.5 per cylinder,” Indian Oil Corporation said in a statement.
However, this increase will not impact the Pradhan Mantri Ujjwala Yojana beneficiaries, as they are covered by the Pradhan Mantri Garib Kalyan Yojana, and entitled to a free cylinder till June 30.
Brent crude oil price
was seen up at $38.11 a barrel on Monday, after hitting a 21-year low, and the US oil futures slumped into negative for the first time in history.
The limited storage facilities across the world had led to huge selling by oil traders in April. The West Texas Intermediate price also climbed and was trading at $35.24 per barrel on Monday.
“Crude oil prices have kept the upper trading range on expectations of extension in output cuts from the Organization of the Petroleum Exporting Countries-plus (Opec+) nations. Opec+ nations may hold a meeting by June 8-9 to discuss and review output cuts. Saudia Arabia has already proposed extension of output cuts till the end of the year,” said a report by HDFC Securities.
With inputs from PTI