Will hike diesel prices at June-end: IOC

Indian Oil Corporation (IOC) may hike diesel prices by another 50 paise only at month-end after the government nod, said director of finance PK Goyal.

He further said as per the government directive, we have the flexibility of increasing  price between 40-50 paise each month.

Also Read: HPCL, BPCL, IOC lose Rs 22000 cr in 1 month on weak rupee

In an interview to CNBC-TV18, Goyal said the government has to take decision on the diesel price hike. "The under-recovery that we have anticipated at the beginning of the year was Rs 80,000 crore. With diesel under-recovery touching close to Rs 6 per liter, the under-recovery has gone more than Rs 1 lakh crore," he said.

Below is the verbatim transcript of PK Goyal's interview on CNBC-TV18

Q: What kind of current diesel under-recoveries are you sitting on given the recent slide in the currency? What has it shot up to?

A: Diesel under-recovery as on June 1 was Rs 4.87. Rs 1 depreciation in rupee is increasing the under-recovery on diesel by 76 paise.

Q: You had recently hiked prices both for diesel and petrol. Given where Brent crude is trading right now which is nearly USD 104/barrel will you be required to increase diesel price sooner than you expected? By how much do you think you would be allowed to?

A: Government of India has to take a decision on diesel prices. As per the government decision, we have the flexibility of increasing the prices between 40-50 paise and we will be doing that on monthly basis.

Q: You must have also been monitoring the weakness in the currency market. There had been some indications from Reserve Bank of India (RBI) to oil marketing companies (OMC) in terms of how better to handle this?

A: We are always in touch with RBI and they are also worried, but there is no such step from RBI in this direction and as per the requirement regarding the crude payment, we are making the payment on spot basis.

Q: The diesel under-recovery has now gone up close to Rs 6/liter. Would 50 paise per month hike stretch it out too long if current price persist meaning that your annual under-recoveries might be higher than envisaged earlier?

A: Government of India has to take decision, but the under-recovery that we have anticipated at the beginning of the year was Rs 80,000 crore. With the current trend the under-recovery has gone more than Rs 1 lakh crore.

Q: Next week we should have at least 50 paise hike in diesel, right?

A: No, this is on monthly basis. We have already increased 50 paise on June 1. It will be only at month-end, only when government takes any decision.

Q: Will you be moving on petrol prices as well? Just before this recent hike you had brought down petrol prices.

A: I cannot comment on that. We will see the scenario on June 15 and will take the decision accordingly.

Q: What kind of subsidy levels are we sitting at already for the entire oil industry given what has happened with the currency just for these early few months?

A: For Rs 1 depreciation in the currency, the under-recovery is increased by roughly Rs 8,000-9,000 crore. Rupee has depreciated in the last two and half months from 54.29 to 58.25. Roughly Rs 4 has been depreciated, so that under-recovery of Rs 36,000 crore has increased from April 1.