Ahead of polls, state-run fuel retailers slash petrol, diesel rates marginally

Petrol price reduced by 18 paise per litre and diesel by 17 paise a litre on Wednesday. Effectively, pump price of petrol in Delhi fell by 0.19% at ₹90.99 per litre and diesel by 0.2% at ₹81.30 per litre

After keeping pump prices frozen for 25 days ahead of crucial assembly elections, state-run fuel retailers, for the first time, reduced petrol price by 18 paise per litre and diesel by 17 paise a litre on Wednesday, even as benchmark Brent crude plunged by about 13% from a peak of $69.63 per barrel since March 12, 2021.

Representational Image. (HT file photo)

Effectively, pump price of petrol in Delhi fell by 0.19% at ₹90.99 per litre and diesel by 0.2% at ₹81.30 on Wednesday.

Despite a sharp fall in international oil rates, state-run oil marketing companies (OMCs) could not reduce fuel prices steeply because they first recovered their losses of past as they had kept retail prices of petrol and diesel frozen since February 27, 2021, ahead of assembly polls even as global oil prices were moving north, two people with direct knowledge of the matter said requesting anonymity.

Brent crude, which was below $60 a barrel until February 5, 2021, saw a strong rally for over a month to peak at $69.63 per barrel on March 11 because of supply squeeze by the oil producers’ cartel, the Organisation of the Petroleum Exporting Countries and its allies, including Russia (together known as OPEC+). The cartel resorted to cut about one-tenth of the global output in April 2020 after Brent crude plunged below $20 per barrel that month due to weak demand because of lockdowns in global economies. But, OPEC+ did not raise output to push up price even as demand resumed.

People cited above said state-run fuel retailers are unlikely to raise petrol and diesel rates in the near future even if international oil prices move up because of polls in states. The Election Commission (EC) announced crucial assembly elections in four states, and a Union Territory, on February 26.

One person said politically sensitive auto fuel prices could be reduced even further before polls, which is starting from March 27 and will continue through the month of April.

“It is a good sign that global oil prices are softening as OMCs are expected to hold the price line for about a month. It is for certain fuel rates are unlikely to go up till the first week of May even if international oil prices show an upward trend,” he said.

Any revenue implication of keeping the oil prices low could be absorbed by the public sector oil companies as they are making good profits, he added. India’s fuel retail has a monopoly of three state-run OMCs – Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL).

HT reported about an equitable burden-sharing plan on March 5 to keep the oil prices low ahead of assembly polls. “Prices can also be reduced by reducing central excise duty and cutting value-added tax (VAT) by states. OMCs can also absorb some losses,” the first person mentioned above said.