If the oil companies decide to pass on the burden caused by the exchange rate fluctuations to the consumers, the new rates will be effective from midnight of Dec 31st. The previous review the oil companies had on prices was on Dec 15th when it was decided that the consumers will not have to bear the brunt of the price hike of 0.65-0.70 per litre that was necessary then. They had stalled the decision under the impression that the Reserve Bank of India could do something on Rupee’s falling value.
A top official has been quoted as saying, “While international price of gasoline (against which domestic petrol prices are benchmarked) are more or less at the same level (as at the time of last revision), the rupee has depreciated to over Rs 53 to a US dollar.”
State-owned oil companies like Indian Oil Corp (IOC) use fortnightly average of benchmark oil price and exchange rate to revise retail rates. An official stated in view of the scenario, “There is an under-recovery of about 85 paise (Rs 0.85) per litre currently. After adding local sales tax, the desired increase in retail prices would be Rs 1.02 per litre.”
However, any hike in petrol prices will be seen as a blow to the aam aadmi, but the political parties will tread carefully as the move could impact their chances in the upcoming Assembly elections.