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EGoM meeting on fuel prices deferred again
The government has postponed a crucial meeting of the empowered group of ministers
(EGoM) scheduled to be held on December 30 for the second week in a row, to take a call
on the diesel price increase. This comes in wake of a five-week high food inflation, which
touched 12.1% for the week ended December 11. Any increase in diesel prices would
push the prices of fruits and vegetables higher, impacting food inflation further.
Diesel has a weight of 4.7% in the wholesale price index (WPI), while LPG has 0.9% and
kerosene has 0.7%. Petrol, the price of which stands decontrolled since June 25, has a
weight of 1.1%. Petrol price was increased by `2.95–2.96/litre earlier this month and its
impact on WPI inflation would be visible when data for December is announced. WPI
inflation for November stood at 7.5%.
Oil marketing companies, IOC, BPCL and HPCL, have been losing revenue on account of
selling diesel below cost at `6.1/litre, `17.7/litre on sale of kerosene and `272.2 on every
14.2kg LPG cylinder. The three companies are projected to end the financial year with loss
of `68,361cr in revenue. We expect diesel price to be hiked once food inflation
moderates, as it will be easier to pass through. We maintain Accumulate on ONGC and
GAIL with a Target Price of `1,391 and `534, respectively.
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