After break, fuel prices may begin rising once again
DIESEL PRICE WAS FROZEN ON JULY 15 AT ₹89.87/LR IN DELHI AND PETROL FOLLOWED SUIT AFTER TWO DAYS, AT ₹101.84 A LITRE
NEW DELHI: State-run fuel retailers have kept automobile fuel rates frozen for almost a month in a departure from the policy of aligning petrol and diesel rates daily by tactically using minor gains of falling international oil prices to offset the need for raising pump rates, three people aware of the development said.
The strategy was to stop the surging streak of fuel prices to avoid the attention of the Opposition when Parliament was in session, a government official and two company executives said, asking not to be named. As the session is now over, the oil marketing companies may gradually resume the policy of daily price revision, they added.
The monsoon session of Parliament started on July 19 and ended two days ahead of schedule on August 11. The companies, however, stopped the daily aligning of pump prices of petrol and diesel days ahead of the session. First, the retail price of diesel was frozen on July 15 at ₹89.87 per litre in Delhi and petrol followed suit after two days, at ₹101.84 a litre.
Meanwhile, international oil prices saw wide fluctuations in the last one month. Benchmark Brent crude, which was at $73.47 per barrel on July 15, first fell to $68.62 on July 19 only to jump by over 10.8% at $76.05 on July 29. Oil prices slumped again in the international market and Brent fell to $69.04 a barrel, a drop of over 9.2% from July 29. It, however, bounced back to above $70 mark last week and closed the last trading session on Friday at $70.59 a barrel with a fall of about 1%.
Despite international oil prices being highly volatile in the last one month, state-run retailers neither cut nor raised pump rates of petrol and diesel in the country, even as the government reiterated that they follow the daily pricing policy.
In a written reply to the Rajya Sabha on August 4, minister of state for petroleum Rameswar Teli said: “Effective June 16, 2017, daily pricing of petrol and diesel has been implemented in the entire country... to bring more transparency and efficiency in pricing to benefit consumers.”
Email queries on this matter sent to the three state-run retailers – Indian Oil Corporation (IOCL), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) – and the petroleum ministry did not elicit any response. The three companies enjoy a monopoly in the domestic fuel retail market with about 90% combined market share.
Domestic petrol and diesel rates had been moving up since May 4, a day after the results of five assembly polls were declared. The price rally saw petrol becoming costlier by ₹11.44 a litre and diesel by ₹9.14 since May 4. Fuel rates jumped to a historic high and petrol crossed the ₹100 per litre mark in several places for the first time. While Indian Oil rates in Delhi are the benchmark for the entire country, retail prices of the two fuels differ from place to place because of variations in state taxes and local levies.
While international oil prices impact pump rates of automobile fuels because India imports more than 80% of the crude oil it processes, steep taxes are the other reason for high rates of petrol and diesel.
In Delhi, central levies account for 32.3% of petrol’s price and state taxes 23.07%, according to official data of August 1. On diesel, central taxes are over 35.38% while state taxes are about 14.62%. Through 2020, as global crude prices fell, the central government raised excise duty on fuel to shore up its finances.
States, too, followed suit as revenues were hit on account of the Covid-19 pandemic. According to official data, the petroleum sector contributed ₹3,71,726 crore central excise revenue in 2020-21, and ₹2,02,937 crore state levies or value-added tax or VAT.