Nayara Energy has raised petrol prices by Rs 5 a litre and diesel prices by Rs 3 at its outlets, as the private fuel retailer moves to narrow the gap between domestic pump prices and higher international crude and refined-product costs.
The increase came into effect from the early hours of Saturday, people familiar with the matter said. Nayara operates 7,108 petrol pumps across India.
The latest revision follows a series of price changes by the company this year as refiners have faced pressure from disruptions in global energy markets. Nayara was the first fuel retailer to pass on the sharp rise in international oil prices to consumers after the Iran conflict disrupted energy supplies earlier this year.
On March 26, it increased petrol and diesel prices by Rs 5 and Rs 3 a litre, respectively. At the time, petrol at its outlets was priced at Rs 100.71 a litre, while diesel cost Rs 91.31. State-owned fuel retailers began raising prices later, in May.
Their increases came in staggered rounds and took the cumulative hike to around Rs 7.50 a litre each for petrol and diesel by late May. On May 25, the fourth increase was Rs 2.61 a litre for petrol and Rs 2.71 for diesel.
But as international crude prices eased with tensions in West Asia subsiding, Nayara reversed its earlier increase. It cut petrol prices by Rs 5 a litre and diesel by Rs 3 on July 1. That was the first reduction by a fuel retailer in more than two years and brought its prices broadly back in line with those of state-owned retailers.
The company has now raised prices again as international crude and petroleum-product costs put renewed pressure on fuel retailers.
OMCs face pressure on fuel margins
The price changes come against a backdrop of pressure on the economics of fuel retailing. Icra estimated last month that oil marketing companies were facing negative marketing margins of around Rs 8 a litre on petrol and Rs 9 a litre on diesel in September.
Retail prices had remained unchanged even as crude and petroleum-product prices rose sharply. Icra estimated that OMCs were losing around Rs 530 crore a day across petrol, diesel and LPG. It said elevated crude prices, along with unchanged domestic fuel prices, were putting pressure on their profitability and cash flows.
The rating agency also said OMCs' combined refining and marketing operations break even when crude prices are between $85 and $90 a barrel. Above that range, marketing losses are likely to emerge if retail prices do not rise correspondingly.
Government asks private retailers not to cap sales
The pressure on retail fuel sales has also led to government intervention. On October 1, the government said private retailers should not cap petrol and diesel sales at their outlets after Nayara and Jio-bp restricted volumes at some pumps amid losses on retail sales.
Officials said the difference between retail and bulk diesel prices had prompted industrial consumers to purchase cheaper fuel from retail outlets, putting pressure on supplies. Jio-bp, the fuel retailing joint venture of Reliance Industries Ltd and UK-based bp, has 2,304 petrol pumps but has not so far changed its petrol and diesel prices.
State firms dominate fuel retail market
State-owned Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation account for more than 90% of India's 1,04,137 petrol pumps.
Their retail prices have historically remained relatively stable even when international crude prices have moved. Nayara's latest move could consequently increase the difference between prices at private and state-owned fuel outlets in the near term.
Nayara operates a 20 million-tonne-a-year refinery at Vadinar in Gujarat and has more than 7,000 fuel stations across the country. The latest hike comes after the company had rolled back its previous increase in July.
Higher retail fuel prices, if sustained, could feed into freight and operating costs and have implications for household inflation and fuel demand. For fuel retailers, however, keeping pump prices below market-linked costs means carrying larger losses, adding pressure for further price adjustments.
