Bhubaneswar: After 48 hours of fuel stations running dry across Odisha, Friday morning brought the inevitable: the end of a four-year price freeze. Petrol prices have been hiked by Rs 3 per litre, but while the increase hits consumers' pockets immediately, the underlying arithmetic suggests this is merely a "down payment" on a much larger debt.

When global crude costs are translated into rupee terms, the gap between what oil companies pay and what consumers pump becomes impossible to ignore.

The Crude Reality: Breaking Down the $100 Barrier

According to the Petroleum Planning and Analysis Cell (PPAC), the Indian Basket of crude oil stood at $108.36/bbl on May 14. While this is a slight dip from April’s average of over $114/bbl, it remains firmly above the "psychological barrier" of $100.

Taking the PPAC’s projected May average of $106/bbl, the core calculation reveals the pressure on the Indian rupee:

· Indian Basket Crude (May): $106 per barrel

· Exchange Rate Assumption: Rs 95/$

· Rupee Equivalent: around Rs10,070 per barrel

· Base Cost of Crude: Rs63 per litre

From Crude to Petrol: The Cost Build-Up

The journey from a barrel of oil to a litre of petrol involves several layers of added costs. Even before the government takes a share, the price escalates quickly:

· Base Crude Cost: ₹63/litre

· Refining, Freight, & Dealer Commission: Adds approx. ₹10–11

· Pre-Tax Petrol Price: around Rs73–74/litre

· Taxes (Central Excise + VAT): These add an additional 45% to 55% to the cost.

This structure pushes the "fair market price" well into the Rs 105+ range, even before accounting for the massive losses oil companies accumulated during the price freeze.

Current Prices in Odisha (Post-Hike):

· Bhubaneswar: Rs 104.19

· Cuttack: Rs 105.19

· Jagatsinghpur: Rs103.85 (Cheapest in the state)

The "Under-Recovery" Gap: Why Rs 3 Isn't Enough

Despite the Rs 3 hike, Oil Marketing Companies (OMCs) are still bleeding. Current estimates suggest that "under-recoveries" (the difference between the cost of production and the selling price) remain between Rs 14–18 per litre.

By the Numbers:

· Required Correction: Rs10–15 per litre

· Actual Hike: Rs 3 per litre

· Remaining Shortfall: Rs 7–12 per litre

In essence, the recent hike has only corrected about 20% of the total gap.

Policy Signals: The Calibrated Climb

The central government appears to be opting for a calibrated approach rather than a "one-shot" shock to the economy. The strategy is clear:

· Inflation Control: Avoid sudden spikes that could derail the economy.

· Gradual Recovery: Allow OMCs to recoup losses in small, digestible increments.

· Market Stabilization: Spread the pain over several weeks to minimize public backlash.

The Outlook: What happens Next

Based on current data, we can expect three potential scenarios:

Crude Oil Indian Basket Price	Likely Outcome
Stays at $105 - $110	Additional Rs 2-5 hike in phases
Rise to $115+	Total increase may reach Rs 8-12/l
Cools below $95	Hikes may pause, price drop unlikely

The Bottomline

The Rs3 hike is a drop in the bucket. With crude costs lingering at Rs63/litre and double-digit under-recoveries still on the books, the system remains structurally unbalanced. This correction is incomplete by design; another petrol price hike isn't just likely—it is imminent.

Also Read: Exclusive| Why PM Modi Pressed the ‘Petrol’ Button

Argus News | Odisha News Today, ଓଡ଼ିଶା ଖବର , Odisha latest news

Odisha News Today

Latest News