Petrol hits ₹100/L in Raj, nears ₹90 in city
NEW DELHI/JAIPUR: The price of petrol touched ₹100 a litre in a Rajasthan district and rose to record highs elsewhere, even as Prime Minister Narendra Modi criticised the governments that came before his for not doing enough to address India’s dependance on imports for oil, and petroleum minister Dharmendra Pradhan appealed to major oil producers to relax their self-imposed production cuts.
The retail price of petrol crossed ₹100 per litre in Rajasthan’s Sri Ganganagar on Wednesday, the first time the fuel was sold at rates in the three digits anywhere in the country, as rising global crude oil prices and tight fiscal headroom appeared to limit the government’s ability to restrain the spike. In Delhi, petrol retailed at ₹89.54 a litre.
The government has urged the oil producers’ cartel – the Organisation of Petrol Exporting Countries (OPEC) – as well as allies such as Russia to ease production cuts as higher prices are hitting demand and adding to inflation.
“We witnessed the largest oil supply cut in history to match the massive global demand destruction ever... With the advent of Covid-19 vaccines and a better understanding of the pandemic, we are now witnessing the revival of economies and energy demand. We have to
build back better collectively...,” petroleum minister Dharmendra Pradhan said at an international symposium attended by officials from several oil producing nations as well as representatives of the International Energy Agency and International Energy Forum, which organised the video conference.
“We need to adopt a balanced approach at this juncture. It is in this spirit of allowing demand recovery to take primacy over crude prices, at least over the next few months, I am appealing for easing of production cuts by the key oil exporting countries, including the OPEC and OPEC Plus group. I have always maintained that prices should be reasonable and responsible, which means that we do not favour too low crude prices also,” he added.
PM Modi, too, addressed the issue, though not specifically in the context of the price in Sri Ganganagar. “India imported over 85% of its oil needs in the 2019-20 financial year and nearly 53% of its gas requirement. Can we be so import dependent? I don’t want to criticise anyone but I want to say (that) had we focussed on this subject earlier, our middle-class would not have been burdened,” he said at a virtual function to inaugurate oil and gas projects in poll-bound Tamil Nadu.
He invited the “world to come and invest in India’s energy sector”, pointing out that the country is spending ₹7.5 lakh crore over the next five years to develop oil and gas infrastructure. By 2030, India will generate 40% of all its energy needs from renewable sources, the Prime Minister added.
Wednesday’s spike reignited the debate over government taxes. Rajasthan chief minister Ashok Gehlot said in the state assembly on Monday that the Union government was “responsible for the high fuel prices by not reducing the taxes”.
“If we reduce the taxes than our revenue will decline. In view of the public sentiments, despite the pandemic, the state reduced 2% VAT (value added tax) bringing a loss of ₹1,000 crore. Now, the Centre should reduce the taxes to lessen the burden on people,” he said.
Taxes account for more than 60% of the pump price of fuel. Part of these are central taxes and part, those levied by the state. In the case of Delhi, data available on the Indian Oil website shows that central excise duty and state value added taxes added ₹32.9 and ₹20.61 per litre to the cost of petrol. The base price, freight and dealer commission amounted to just ₹35.78 per litre for petrol. In effect, almost 60% of what people pay for petrol is taxes.
Sri Ganganagar pays the highest rate for the fuel since it is the furthest from a nearby dispatching facility, which adds to transportation costs that is passed on to the consumer.
According to an official who asked not to be named, the government is not considering reducing the excise duty on fuel because of revenue concerns. “India’s fiscal deficit is quite high at 9.5% of GDP [gross domestic product] in 2020-21 because of the Covid-19 pandemic. The Budget has also proposed ₹12 lakh crore borrowings in FY22 that would mean a high fiscal deficit of 6.8% next fiscal year. In these circumstances, the government has no space to immediately cut excise duties of petrol and diesel,” this person said, asking not to be named.
SC Sharma, an energy expert and former officer on special duty at the erstwhile Planning Commission, said: “In spite of much lower global oil demand, the restricted supplies and production cuts by oil exporting countries are some of the major reasons for high oil prices... An increase of 27.5% within oneand-a-half month is too sharp even at a time when Covid pandemic is not subdued and a number of European countries are under partial lockdown.”
“It is believed that a gradual production increase was part of the agenda with 0.5 million barrels per day in the January 4 meeting of OPEC. However, subsequent to the meeting Saudi Arabia announced 1 million barrels per day of voluntary oil production cuts. In a situation when markets are recovering globally, such a high production cut could be one of the reasons for a price spike in a short period of time,” he added.