Fuel retailers may cut rates in run-up to polls
NEW DELHI: In a respite to consumers, state-run fuel retailers may cut petrol and diesel rates ahead of crucial assembly elections with India’s average crude import price dropping by 5% in a week, four people aware of the matter said.
Notwithstanding the outcome of the international cartel Opec+ meeting not to raise output, prices of petrol and diesel need to be brought down, with the Centre, states and oil marketing companies equitably sharing revenue implications, they added, requesting anonymity.
Two of the people said OMCs have already built a cushion of ₹2-3 per litre even as international oil prices have fallen after reaching a 13-month peak on February 24. Fuel retailing in India is dominated by three state-run OMCs – Indian Oil Corp. Ltd (IOC), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL). But the move will also require governments to play a part. “The three stakeholders need to make coordinated efforts – the Centre may reduce excise duty, states could forgo a part of ad-valorem value-added tax (VAT), and OMCs would take some hit as their net profits have gone up significantly,” one of the two people cited above added.
Benchmark Brent crude hit $67.04 a barrel on February 25. From there, it fell to $62.7 on Tuesday. Some recovery took place on Wednesday as Brent closed at $64.07 per barrel that day. It, however, remained volatile during the intraday trade – between $63.33 and $64.88– on Thursday even as the Opec+ meeting was on. After the meeting, it soared 5.18% to $67.39 per barrel, putting further pressure on the government to arrest prices, an official said.
The high prices of fuel in India are on account of high taxes. Indeed, last year, as oil prices collapsed, both the Centre and the states raised levies (so prices stayed constant) in an effort to shore up their revenues.
While the base price of petrol is ₹33.26 per litre, it attracts ₹32.90 a litre central excise and ₹21.04 per litre local levies in Delhi. Petrol and diesel in Delhi were retailing at ₹91.17 per litre and ₹81.47 a litre, respectively on Thursday. OMCs have not changed pump prices of the two for the past five days.
Discussions on a possible cut have been happening between the Centre, the oil companies and some states, largely ruled by the Bharatiya Janata Party, said the first person cited above.
Last week, finance minister Nirmala Sitharaman indicated that Centre would talk to states to reduce taxes on fuels. The RBI Governor Shaktikanta Das, on February 25 called for coordination between the Centre and the states to reduce taxes on petrol and diesel. The ministries of finance and petroleum, IOCL, BPCL and HPCL did not respond to email queries on this matter.