Petrol price could be raised by Re 1 from January 1st

It would be interesting to see how government reacts to the plea from OMCs to raise the price of petrol by a rupee from January 1st 2012. That’s because there will be a high priority meeting held by the Oil manufacturing companies as a part of the fortnight petrol price appraisals on December 31st.

It is well known that the petrol needs in the country are met largely by the crude oil imports from other countries like U.S and Singapore. So, once again the falling rupee value plays a very important role in the imports taking the petrol price far above than it actually is. On top of that, the heavy excise duties levied by the government drives the decontrolled petrol price further up the ladder. The government has a lot to fear from the opposition now that there are assembly elections in five different states which pose a huge threat to the ruling party. The Oil Manufacturing Companies are the ones in the middle to absorb the losses in between the depreciating rupee and their inability to pass on the same to the consumers.

There was general panic spread among the public just about a fortnight back thinking that the government will after all give a green signal allowing the OMCs to increase the petrol price by around Rs 0.65. But, as that didn’t happen, it seems to be more than a possibility to come up with a direct Re 1 hike after the combined decision to be taken on December 31st. Ever since the last petrol price reduction that came in November, ironically the rupee value constantly suffered a huge decline sliding down by 25% to the lowest in the past 6 months, while just then the OMCs warned about the possible hike as when they see any changes in the influencing factors. The crude oil price and the rupee exchange value against the dollar are the key deciding factors to determine the petrol price in the country.