Govern­ment tem­pers daily price re­vi­sion of petroleum prod­ucts

Move ne­ces­si­tated by con­sumer out­rage over fre­quent in­creases in re­tail price

Financial Chronicle - - FRONT PAGE - SUB­HASH NARAYAN New Delhi

THE govern­ment seems to have tem­pered its pol­icy of mar­ket­de­ter­mined re­tail pric­ing of petroleum prod­ucts that were hith­erto be­ing re­vised on a daily ba­sis based on in­ter­na­tional prices.

The move has been ne­ces­si­tated by the po­lit­i­cal back­lash and con­sumer out­rage over fre­quent in­creases in re­tail price of petrol and diesel.

Data from state-owned oil com­pa­nies give enough in­di­ca­tion to prove that a veiled price con­trol has made its come­back and petrol and diesel prices have been left un-re­vised for days in suc­ces­sion.

The change be­comes prom­i­nent ever since re­tail prices of prod­ucts touched three-year high lev­els last month even though crude oil prices dur­ing the pe­riod halved. Un­like the daily price re­vi­sion, that shot up petrol and diesel prices by over Rs 7 sand Rs 5 per litre, re­spec­tively, be­tween July and mid-Septem­ber, for last one month the re­vi­sion seems to be more mod­est.

Notwith­stand­ing fre­quent changes in prices of petroleum prod­ucts glob­ally, state-run oil com­pa­nies seem to have obliged the nodal petroleum min­istry to hold on to the price line for longer pe­ri­ods.

Data avail­able with the coun­try’s largest oil mar­ket­ing firm In­dian Oil Cor­po­ra­tion (IOC) in­di­cates that re­tail price of petrol and diesel re­mained the same for more than one day on six dif­fer­ent oc­ca­sions be­tween Septem­ber 12 and Oc­to­ber 11.

The re­tail price re­mained un­changed for three days con­sec­u­tively on more than two oc­ca­sions dur­ing the pe­riod, a devel­op­ment not seen on any of the days since the in­tro­duc­tion of the daily price re­vi­sion mech­a­nism on June 16.

“The govern­ment seems to have suc­cumbed to the pop­u­lar op­po­si­tion to the re­cent spike in petrol and diesel prices and start price reg­u­la­tion of prod­ucts in some form. This is easy to im­ple­ment as al­most 90 per cent of the coun­try’s re­tail mar­ket is con­trolled by state-run oil com­pa­nies un­der ad­min­is­tra­tive con­trol of the Cen­tre,” said an oil sec­tor an­a­lyst, not want­ing to be named.

“Oth­er­wise main­tain­ing the same price for petrol and diesel in a mar­ket where prices vary al­most on an hourly ba­sis is next to im­pos­si­ble. The prod­uct prices are de­pen­dent on global oil and prod­uct prices, re­fin­ery mar­gins and cur­rency ex­change rates, all of which is highly volatile,” he added.

When con­tacted, an oil com­pany of­fi­cial said re­tail prices were not re­vised on a few days in the last onemonth largely be­cause mar­ket prices were sta­ble or the in­crease and de­crease were very min­i­mal.

“Oth­er­wise, OMCs are free to ad­just the prices as per global move­ments,” he said. Re­tail price of auto fu­els has also be­come big headache for the govern­ment for the last onemonth since it wit­nessed a spike. The big crit­i­cism the govern­ment has faced is on ac­count of higher petrol and diesel prices even though global oil prices have re­mained low in an over­sup­plied mar­ket.

Oil min­is­ter Dhar­men­dra Prad­han had to con­vene emer­gency meet­ings with oil com­pany heads on more than one oc­ca­sion in the past to curb the rise.

Crude oil price (In­dian bas­ket) hov­ered around Rs 50.63 a bar­rel in Au­gust while re­tail price of petrol has reached at Rs 70.38 a litre and diesel Rs 58.72 a litre in Delhi (as of Septem­ber 13, 2017).

This was more than the price of petrol at Rs 68.51 a litre pre­vail­ing in Septem­ber 2014 when crude oil price was $101.89 a bar­rel.

While petrol price has now fallen by al­most Rs 2 litre to Rs 68.48 and diesel to Rs 57.03 a litre in Delhi, the fall is largely on ac­count of Cen­tre fi­nally re­duc­ing ba­sic ex­cise duty on the two by Rs 2 per litre early this month. The emer­gency mea­sures to con­tain auto fuel prices have also seen states Ma­ha­rash­tra, Hi­machal Pradesh, Ut­tarak­hand and Gu­jarat re­duc­ing their VAT rates.

Ever since com­ing to power, the BJP led NDA govern­ment in­creased ba­sic ex­cise duty on petrol and diesel nine times (be­tween Novem­ber 2014 and Jan­uary 2016) that more than dou­bled the govern­ment's ex­cise mop-up to Rs 242,000 crore in 2016-17 from Rs 99,000 crore in 2014-15. In all, Rs 11.77 hiked duty on petrol per litre and that on diesel by 13.47 a litre.

The Oc­to­ber 4, Rs 2 ex­cise duty cut is first such an­nounce­ment by the govern­ment.

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