Fuel firms told not to hike retail price?

With the BJP government waking up to the sensibilities of urban consumer, a directive has gone to State-run oil marketing companies, asking them not to increase retail petrol and diesel prices.

Rather, they should act as an inflationary cushion and absorb a part of the losses stemming from the recent rise in global crude oil prices, news agency Bloomberg has reported. In a knee-jerk response to the news, the shares of oil marketing companies – HPCL, BPCL and IOC – slumped. Both Hindustan Petroleum Corporation and Bharat Petroleum Corporation plunged over 7 per cent, while Indian Oil dropped over 6 per cent.Global crude oil prices are caught in an upward spiral, rising over $70 a barrel, the highest level since 2014. India imports about 80 per cent of its annual crude oil requirement. Rising global crude prices have sent domestic petrol and diesel prices to multi-year highs. Petrol was retailing at Rs. 73.98 a litre in Delhi, according to Indian Oil website, while diesel was being sold at Rs. 64.96 per litre.High fuel prices have led to calls for an excise duty cut by the government. But the government had ruled out any such immediate reduction. The matter of reduction of local levies was left to the respective state governments.

State-owned oil companies had in June last year scrapped the 15-year old practice of revising rates on the 1st and 16th of every month. Instead, they adopted a daily price revision system to instantly reflect changes in cost. Since then, prices are revised on a daily basis.

Besides global crude prices, government taxes - both at the central and state level- and marketing margins determine the final retail price.

HPCL is not aware of any directive from the government to absorb a part of the losses from higher crude prices, the company’s chairman, MK Surana, said on the sidelines of the International Energy Forum in New Delhi.