Fuel prices may fall after budget

Petrol and diesel may become cheaper after the Budget as Finance minister Pranab Mukherjee is expected to slash excise and customs duties on these two fuels in his Budget for 2011-12. Gaurav Choudhury and Anupama Airy report.

Petrol and diesel may become cheaper after the Budget. Finance minister Pranab Mukherjee is expected to slash excise and customs duties on these two fuels in his Budget for 2011-12, government sources told HT.

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The exact quantum of relief to consumers will depend on the extent to which oil marketing companies (OMCs) pass on this cut to customers.

Since diesel prices, in particular, have a direct effect on the transport cost of all goods and commodities, a cut in its retail price will help rein in prices and inflation — to an extent — and provide relief to millions.

A litre of petrol currently sells for R58.37 in Delhi.

Mukherjee may also slash the customs duty by on crude oil by 2.5 percentage points from its current level of 7.5%. This will provide relief to the oil companies and, if they pass on the cut, to consumers as well.

The duty cuts will result in an estimated revenue loss of about R23,000 crore to the exchequer.

Global crude prices are hovering around the $100 (R4,500) per barrel mark, and oil companies are losing R2.50 as revenue on every litre of petrol and more than R10 on every litre of diesel sold.

Since June, when the government decided to decontrol petrol prices and link them to international crude prices, oil marketing companies (OMCs) have raised prices six times.

The government, however, continues to control the prices of diesel and cooking fuels and partially compensates OMCs for the losses they suffer as a result of selling these fuels at less than the cost price.