In the sixth such hike in three months, petrol price has been increased by a steep Rs 2.35 per litre and diesel by 50 paise per litre on falling rupee and firming international oil prices.
The increase in rates, which will be effective midnight on Saturday, are excluding local sales tax or VAT, Indian Oil Corp, the nation's largest fuel retailer, announced. The actual hike will be higher and will vary from city to city.
Petrol price in Delhi will go up by Rs 2.83 to Rs 74.10 per litre while it will cost Rs 81.57 per litre in Mumbai as against Rs 78.61 currently.
This is the sixth increase in rates since June and in all petrol prices have gone up by a massive Rs 9.17 per litre, excluding VAT. Price of petrol in Delhi has gone up by over Rs 11 per litre after including state tax since June 1.
In a parallel move, diesel price was hiked by 50 paise, excluding VAT, in line with the January decision of the government allowing oil companies freedom to raise prices in small doses every month to wipe out mounting losses.
Diesel price in Delhi has been hiked by 57 paise to Rs 51.97 per litre while it will cost Rs 58.86 in Mumbai from tomorrow as compared to Rs 58.23 currently.
Saturday's hike in the eighth since the January 17 and most of the losses on diesel sales should have been wiped off by now to make the fuel market priced. But the fall in rupee, around 25 per cent since April, has worsened the situation and oil firms are losing Rs 12.12 per litre despite prices being raised by a cumulative Rs 4.75 this year.
Oil firms had on June 1 raised petrol prices by 75 paise, excluding VAT, and followed it with a Rs 2 per litre increase on June 16, a Rs 1.82 increase on June 29, Rs 1.55 hike on July 15 and 70 paise increase from August 1.
IOC said since the last revision in rates effective August 1, the rupee-US dollar exchange rate has deteriorated sharply, from Rs 59.49 to a US dollar to Rs 63.88, necessitating this price increase.
"Currently, the rupee-dollar exchange rate continues to be extremely volatile. Also, geopolitical situation in the Middle-East is leading to pressure on international oil prices as well," it said in a statement.
The movement of prices in international oil markets and exchange rate were being closely monitored and subsequent price changes will reflect developing trends of the market, it added.
Deteriorating exchange rate has led to widening of losses on diesel from Rs 10.22 in first fortnight of August to Rs 12.12 per litre loss. The same has also led to widening of under-recoveries on kerosene to Rs 36.83 per litre from Rs 33.54 at the beginning of the company and on LPG to Rs 470 per cylinder from Rs 411.99.
For the full fiscal, IOC estimated total revenue loss or under-recovery of Rs 144,000 crore on sale of diesel, LPG and kerosene for the industry.