Railway Budget 2013: Oil cos may not pass on freight hike to consumers

Freight on diesel was increased by 5.79 percent to Rs 1,041.80 per tonne from Rs 984.80 a tonne currently. The same on kerosene went up by 5.79 percent from Rs 886.30 per tonne to Rs 937.60 a tonne and that on liquefied petroleum gas (LPG) by 5.79 percent to Rs 937.60 a tonne.

The rates exclude development charge and busy season charges which essentially mean that actual hike for oil companies would be higher, according to the Railway Budget for 2013-14 presented in Lok Sabha by Railway Minister P K Bansal. Oil companies transport over about 32-33 percent of diesel, LPG and kerosene through railways and the hike in
freight will either have to be passed on to consumers or have to be accounted as under-recoveries, which the government would compensate from the Union Budget.

Fuel price hike: How much will HPCL, BPCL, IOC gain

The increase would mean an additional outgo of Rs 500 crore for state oil firms, Indian Oil Corp (IOC), Hindustan Petroleum Corp (HPCL) and Bharat Petroleum Corp (BPCL).

"We follow a fortnightly average cost as the methodology for revision in retail price of petrol and diesel. For LPG and kerosene, it is a monthly average. So, we have to wait (before passing on the hike)," an oil industry official said.

Also, the freight increase are proposed to come into effect from April 1 and oil firms will decide on marginally increasing fuel prices only then.

The increase in retail rates of diesel, LPG and kerosene that is needed because of the freight increase is yet to be calculated.

Bansal said the increase in diesel prices last month had added Rs 3,330 crore to Railway's fuel bill. Also, adding to its burden, is electricity tariffs that are revised periodically.

"The increase in fuel bill during 2013-14 on account of these revisions would be more than Rs 5,100 crore," he said while proposing an across-the-board increase in freight charges of over 5 percent.