Fuel rates at record high; petrol costlier by ₹1.40/litre in a week

Public sector oil companies raised petrol by 27 paise per litre and diesel by 30 paise a litre on Tuesday even as their average cost of crude oil import fell to ₹4,934.27 a barrel from ₹5,055.82 a barrel about a week ago

Fuel rates have reached yet another record on Tuesday as state-run oil marketing companies raised petrol and diesel prices for sixth time in eight days making petrol costlier by ₹1.40 per litre and diesel by ₹1.63 a litre since May 4.

Representational Image. (HT file)

Public sector oil companies raised petrol by 27 paise per litre and diesel by 30 paise a litre on Tuesday even as their average cost of crude oil import fell to ₹4,934.27 a barrel from ₹5,055.82 a barrel about a week ago. Benchmark Brent crude also dropped by 1.2% at $67.50 per barrel during the intraday trade on Tuesday.

State-run fuel retailers are compelled to hike petrol and diesel rates now as they have to recover their past revenue losses for not raising fuel prices during the assembly elections in four states and one Union Territory, two executives working in different oil marketing companies said, requesting anonymity. Petrol and diesel rates did not see any upward movement for 66 days in a row from February 27. The Election Commission had announced assembly polls on February 26.

With the latest price increase, petrol is sold at record ₹91.80 per litre in Delhi and diesel at ₹82.36 a litre on Tuesday. Petrol prices have already crossed ₹100/litre mark in certain remote areas, such as Ganganagar (Rajasthan) and Anuppur (in Madhya Pradesh). Fuel rates vary from place to place due to state-specific taxes, cess and other local levies.

According to Indian Oil Corporation (IOC), petrol and diesel is sold at ₹98.12 per litre and ₹89.48 a litre in Mumbai on Tuesday. Fuels are priced at ₹91.92 per litre (petrol) and ₹85.20 a litre (diesel) in Kolkata, and ₹93.62 per litre (petrol) and ₹87.25 a litre (diesel) in Chennai.

Pump prices of petrol and diesel in India are aligned to their international benchmarks and often move in tandem. The rupee-dollar exchange rates also have impact on fuel pricing as India imports over 80% of crude oil it processes and pays in dollar.

During the 66-day pause on rate hike, state-run retailers had reduced petrol and diesel rates by 77 paise and 74 paise a litre, respectively in four parts. But, the entire gains to the consumers were reversed in the month of May.

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 per litre on sale of the fuel because of higher international oil rates and depreciation of rupee against the dollar.

Fuel rates in India is also high because of high central and state taxes. Central and state levies account for the chunk of the retail price of fuel -- in Delhi for instance, central levies account for over 36% of petrol’s retail price, and state levies, 23% but 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)— controls almost 90% of the domestic fuel retail market.