After 19 days, diesel becomes costlier amid surge in international oil prices
State-run fuel retailers on Friday raised diesel rates by 20 paise a litre, the first price hike after 19 days of pause as international crude oil prices surged 6.96 per cent at $77.25 a barrel since September 5 on rising demand.
Diesel price, which had softened to ₹88.62 per litre three weeks ago after climbing to record ₹89.87 a litre in mid-July, has been priced at ₹88.82 on Friday in Delhi. Pump prices of petrol in the national capital, however, remained unchanged at ₹101.19 since September 5.
Retail prices of petrol and diesel are under pressure due to rising international oil rates and auto fuel rates may see a northward movement, two executives working in different oil companies said, requesting anonymity. Benchmark Brent crude continued an upward movement in intraday trade on Friday with a gain of 0.14 per cent at $77.36 a barrel. On Monday, HT reported that fuel retailers would start raising rates soon.
As international oil prices dropped below $70 a barrel in mid-August, fuel retailers had reduced diesel rates by 20 paise per litre on August 18 after an all-time high for 34 days. Petrol prices were also reduced by 20 paise a litre on August 22, after it maintained a record of ₹101.84 per litre in Delhi for 36 days.
Subsequently, petrol and diesel had become cheaper in small doses by 65 paise a litre and ₹1.25 per litre, respectively. After that, the prices of the two fuels remained frozen since September 5.
According to the people mentioned above, international crude oil prices rose on subdued US oil production in view of the Ida hurricane which tore through the Gulf of Mexico, and robust demand on optimism about global economic growth.
“Companies were holding prices, and expecting some tax relief from the government in terms of GST [Goods and Services Tax] relief, but the proposal to include petroleum products in GST was declined in the GST Council meeting on Friday, forcing companies to think about raising fuel rates,” one of the people mentioned above said.
International oil rates, which are often volatile, directly influence pump prices of petrol and diesel in India. Heavy loads of central and state taxes are also responsible for astronomically high rates of auto fuels.
Throughout 2020, as global crude prices plunged (below $20 a barrel in April last year), the central government raised excise duty on fuel to shore up its finances. States too followed suit as their revenues were hit on account of the Covid-19 pandemic. As a result, the central and state levies on petrol and diesel are over 50 per cent of their retail prices.
According to official data, the petroleum sector contributed ₹371,726 crore central excise revenue in 2020-21, and ₹202,937 crore state levies or value-added tax (VAT).
Due to the high incidence of taxes and a spike in international oil prices, petrol and diesel rates had soared to a record ₹101.84 per litre and ₹89.87, respectively, in mid-July this year. While prices softened a bit in mid-August, a further spike in auto fuel rates is expected as international crude prices are again moving north and the value of the rupee is depreciating against the dollar.
India imports more than 80 per cent crude oil it processes and pays in dollars. In Delhi, central levies account for over 32.5 per cent of petrol’s price, and state taxes (VAT) 23.07 per cent. On diesel, the central excise is over 35.8 per cent while VAT is more than 14.6 per cent.