New Delhi: As the last vote was cast in poll-bound states Monday, all eyes immediately turned to some important numbers — not the assembly election results in the five states, but the prices of petrol and diesel.
Nearly 48 hours on, fuel retailers that were widely expected to raise the prices have kept the rates unchanged. Even the massive upward climb in global prices on Russia’s invasion of Ukraine hasn’t made an impact yet.
In New Delhi, petrol continues to be sold at Rs 95.41 per litre and diesel at Rs 86.67 per litre. In Mumbai, petrol is at Rs 109.98 per litre and diesel at Rs 94.14. Prices of the two fuels vary across the country, depending upon state levies.
Sources in the Narendra Modi government indicate that while the global crude oil prices continue to be volatile, fuel retailers haven’t yet raised prices at the pumps because the government is considering options on how to tackle the situation once the price rise kicks in.
“We are working out some options. One of them may include reducing excise duty simultaneously with increase in retail prices,” a senior government official told ThePrint on the condition of anonymity.
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‘Takes time to decide’
State-owned retailers — Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd, and Hindustan Petroleum Corp. Ltd — have held fuel prices steady for over four months, pending the elections in five states.
The expectation was that the rates would go up after polling ended in Uttar Pradesh on 7 March. But this hasn’t happened.
The price of India’s crude oil basket rose to $126.55 per barrel Tuesday, its highest level since July 2008, according to data from the Petroleum Planning and Analysis Cell.
A.K. Sharma, former director, finance, at Indian Oil, the biggest of the oil marketing companies (OMCs), said: “It takes time to decide how the gap between international and domestic prices can be filled. I expect it could be a combination of price increase and an excise duty cut.”
Since the retail prices are decided based on a 15-day rolling average, the OMCs may increase the fuel prices keeping average crude price at $105-110 per barrel, he said.
What’s the expected rise?
With the Indian crude oil basket’s price about 45 per cent higher than what it was in November, experts believe that if fuel retailers take crude oil price at $115 per barrel, petrol and diesel prices would have to be hiked by at least Rs 15-20 per litre for them to not incur a loss on selling the fuels.
The last price revision by fuel retailers was made in November. Since then, crude prices have increased around $40 per barrel. This coincided with the government cutting excise duty on petrol and diesel by Rs 5 and Rs 10 respectively, and followed by a cut in value added tax in many states and Union territories to give further relief to consumers.
Even after the cut in duty on petrol and diesel, the excise duty on the two fuels is still very high. Currently, the excise duty on petrol is at Rs 27.90 per litre, while on diesel, it is Rs 21.80 a litre.
Govt concerned over rising global crude prices
On Tuesday, Finance Minister Nirmala Sitharaman said it will have to be seen how the government will be able to mitigate the impact of higher fuel prices.
“It will certainly have an impact on the Indian economy,” she said at an event in Bengaluru. “How much we are going to be prepared to take it as a challenge and mitigate the impact… is something which we will have to see as we go.”
India imports over 80 per cent of its crude oil needs, and clubbed with a depreciating rupee, the value of oil imports is likely to be even higher, affecting India’s current account deficit.
The government is waiting to see if there are alternative sources from where it can get crude, the FM said. “Obviously global markets are all equally unthinkable at various sources,” Sitharaman added.
BPCL chairman Arun Kumar Singh told The Economic Times Wednesday that the current oil surge would not last, and prices are likely to drop to $100 per barrel within two weeks.
He also said there was no need for India to panic. “Russian oil and gas exports are not going to be blocked unless Russia itself decides to do so, which is unlikely,” Singh said. “World cannot afford the current prices. The global economy will slow down and there will be a correction in demand for crude.”
(Edited by Amit Upadhyaya)
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