Fuel prices rise for 11th day, petrol up by ₹1.94/lt and diesel by ₹2.22/lt
The upward movement of petrol and diesel rates resumed on Friday after a day’s pause as pumps raised prices of the two fuels by 29 paise and 34 paise per litre respectively, making petrol costlier by ₹1.94 a litre and diesel by ₹2.22 per litre in 11 days.
With the latest price revision on Friday, the eighth hike since May 4, fuel rates broke yet another record by taking pump prices of petrol to ₹92.34 per litre and diesel to ₹82.95 a litre in the national Capital. While fuel rates in Delhi are the benchmark for the entire country, retail prices of the two fuels vary from place to place because of variations in state taxes and local levies.
Petrol prices have already crossed the ₹100 to a litre mark in several places such as Ganganagar (Rajasthan), Indore (Madhya Pradesh), and Parbhari (Maharashtra).
To be sure, much of the retail price is taxes. For instance, in Delhi, on May 14, central taxes accounted for 36.4% of petrol’s price, and state taxes, 23%. On diesel, central levies are over 39% while state taxes are about 15%. Through 2020, as global crude prices fell, the Central government raised excise duty on the fuel to shore up its finances. States too followed suit -- with revenue hit on account of the pandemic.
State-run oil marketing companies raised auto fuel rates on Friday despite benchmark Brent crude falling by 3.27% at $67.05 per barrel on Thursday, and it further fell by over 0.5% during the intraday trade on Friday. Retail prices of petrol and diesel in India are aligned with their international rates of previous day. The average exchange rate for import of crude oil has also been stable around ₹73.45 per dollar in the last three days. International oil prices and rupee-dollar exchange rate impact domestic pump prices as India imports over 80% crude oil it processes and pays in dollar.
According to executives working in state-run oil marketing companies, there are two main reasons for the recent spike in auto fuel prices – high international oil rates and recovery of past revenue losses that companies had occurred for keeping any upward price movement of the two politically sensitive fuels under pause for 66 days since February 27 because of assembly elections in four states and one Union Territory. The pump price rally in India started a day after poll results on May 4.
During the 66-day pause on rate hike, state-run retailers reduced petrol and diesel rates by 77 paise and 74 paise a litre, respectively, in four small doses. But, the entire gains to the consumers were quickly reversed in the first four consecutive rounds of rate hikes starting from May 4.
HT wrote on April 28 that fuel rates would move north after polls and their pump prices would start seeing small increments as state-run fuel retailers had been losing about ₹3 a litre on sale of the fuel because of higher international oil rates and depreciation of rupee against the dollar.
Fuel rates in India are also high because of high central and state taxes. Given the parlous state of the economy, especially in the midst of the raging second wave of the coronavirus disease pandemic, it is unlikely that those will be reduced. Indeed, the Centre’s move to raise excise even as global oil prices crashed last year, helped boost government revenues.
The government deregulated the pricing of petrol on June 26, 2010 and diesel on October 19, 2014. Accordingly, state-run retailers are free to change pump prices every day. Public sector retailers — IOC, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL)— control almost 90% of the domestic fuel retail market.