Petrol, diesel prices rise third day in a row; ₹1.55/litre hike since budget day

Auto fuel rates have moved up for the third consecutive day on Thursday; petrol by 25 paise per litre and diesel by 30 paise a litre respectively, making them costlier by Rs1.55 per litre since the Union Budget was presented on February 1 that restructured Central levies on them to carve out a dedicated fund for the agriculture sector.

Petrol price on Thursday made a new record at Rs87.85 a litre in Delhi while diesel is sold at Rs78.03 per litre in the national Capital. Petrol and diesel rates are at record levels in Mumbai at Rs94.36 per litre and Rs84.94 a litre respectively. Retail prices of the transport fuels differ across the country due to variations in local levies.

Domestic retail prices of petrol and diesel are linked with the international market witnessing a spike in crude oil prices in expectation of rising demand, but oil producers are unwilling to raise supply, one government official and two executives of state-run oil companies said requesting anonymity.

Tightening of output by oil producers’ cartel -- the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, particularly Russia (together OPEC+) -- and rising demand after hope of faster recoveries of global economies due to Covid-19 vaccines are two key reasons for a jump in international oil prices. Benchmark Brent crude that was at $56.35 per barrel on February 1 jumped 9% at $61.47 on Wednesday, highest since January 2020. It, however, shed some of the gains during the intraday trade on the Thursday at $61.12 per barrel, down by 0.57%.

The government official mentioned above ruled out any immediate cut on Central excise to provide relief to consumers from rising fuel rates citing revenue concerns. “The Budget is presented just 10 days ago. India’s fiscal deficit is quite high at 9.5% of GDP [gross domestic product] in 2020-21 because of Covid-19 pandemic hit its economy. The Budget has also proposed Rs12 lakh crore borrowings in FY-22 that would mean a high fiscal deficit of 6.8% next fiscal year. Under these circumstances, the government have no space to immediately cut excise duties of petrol and diesel,” the official said.

The Budget on February 1 imposed an agriculture Infrastructure and Development Cess (AIDC) of Rs2.5 per litre on petrol and Rs4 per litre on diesel, after reducing Central excise on them by same quantum to keep the total central tax unchanged. Currently, central levy on petrol is Rs32.98 per litre and diesel is Rs31.83 a litre, marginally higher than their basic prices [excluding freight cost, dealer commission and state levies].