GOVT MAY NOT REDUCE FUEL PRICES SOON
NEW DELHI: The government is unlikely to immediately reduce prices of petro products, though work on a contingency plan to deal with crude spikes will continue as crude prices on Monday extended it longest run of losses in almost four months, said two government officials in the know of the matter.
“The government will not react unless crude prices are rising on fundamentals. Analysis shows that crude will remain range bound at $70 for most parts of this financial year,” said an official in finance ministry who did not wish to be named.
Fundamental analysis involves looking at economic, production, inventory and other indicators beyond just the trading pattern of a stock or commodity.
But fall in international price might not translate to immediate cuts in retail prices, as oil marketing companies such as Indian Oil and HPCL had stopped price revision during the 19-day Karnataka polls, and are still adjusting the losses made during that period. “There have been discussions on long-term plans to contain oil prices such as the “windfall tax”. But there is opposition from oil producing companies,” said a second officer, who also did not wish to be quoted.
First proposed in 2008, a windfall tax will be levied on oil pro- ducing companies, who get paid international crude prices for oil produced from domestic fields, once crude rates cross a pre-determined level. But even in 2008, private oil producers showed stiff opposition to the proposal and it was shelved.
Petrol and diesel prices increased for the 15th consecutive day on Monday and touched record highs with petrol being sold at ₹78. 27 per litre and diesel at ₹69.17 in Delhi.
Crude prices softened as Saudi Arabia and Russia said they are discussing reviving output as prices jumped to levels last seen in 2014. Brent futures that traded above $80 a barrel last week slumped to around $75 on Monday. Saudi Arabia and Russia had cut production halted as part of a deal between Opec and its allies since January. But several oil producing countries continue to oppose an increase in production and the decision will only be known when they meet in Vienna next month.