May 24: Hit by the sharp fall in the value of the rupee to a record low, government-owned oil marketing companies (OMCs) have hiked the price of petrol in the country. At Rs 7.50 per litre, this is the steepest hike in the past decade, causing even more heartburn to users of petrol-engined vehicles, who have already experienced a series of hikes since the past two years since fuel prices were decontrolled in June 2010 (see table below). In the last fiscal, petrol prices were revised six times, increased four times and reduced twice.

The government (and OMCs) though has, as yet, refrained from biting the bullet on the price of diesel, testing the waters as it were with petrol. However, expect a price hike announcement on diesel and LPG on May 25.

In a statement issued by Indian Oil Corporation, the OMC says that since the last petrol price rise on December 1, 2011, international oil prices have increased and the USD-INR exchange rate has shown further deterioration from Rs 51.50/$ to Rs 56.18/S. While the Indian basket of crude has increased by 3.5 percent from $109.23/bbl to $113.08/bbl, international MS (motor spirit) price has gone up by 14.5 percent from $108.62/bbl to $124.42/bbl. The combined effect of changes in international MS prices and the exchange rate has resulted in an increase in under-recovery since the last price change. However, due to declining international MS prices during the current fiscal, under-recovery has shown a downward trend from Rs 8.04/litre in the second fortnight of April 2012 to Rs 7.17/litre during the first fortnight of May 2012, and further to Rs 6.28/litre during the current fortnight.

Given the losses being incurred, Indian Oil says it was compelled to increase petrol price by Rs 6.28 per litre (excluding VAT / sales tax). This excludes losses already suffered till date during the current fiscal (2012-13), which would require an additional increase of around Rs 1.50/ litre in the selling price of MS for the balance part of the year.