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Diesel drops for the first time in 3 months, petrol costlier by 28 paise
The first diesel price reduction in about three months came after international benchmark Brent crude fell by $1.61 a barrel or 2.06% at the Friday close, compared to its peak of $77.16 last Monday
State-run oil retailers slashed diesel price by 16 paise per litre on Monday, the first auto fuel rate reduction since April 15 even as petrol became costlier by 28 paise, the 39th hike since May 4, a day after the results of five assembly polls were declared.
The first diesel price reduction in about three months came after international benchmark Brent crude fell by $1.61 a barrel or 2.06% at the Friday close, compared to its peak of $77.16 last Monday. Domestic fuel retailers align pump prices of petrol and diesel with their respective international benchmarks of previous day, which often move in tandem with crude oil rates. International oil markets do not operate on weekends.
According to executives working in state-run oil marketing companies, companies have already recovered their past revenue losses on diesel like the one they suffered for 66 days from February 27 when rates were not raised because of assembly elections in four states and one Union Territory.
The revenue losses on petrol waere higher compared to diesel, hence its saw a higher price surge in the last 70 days, they said requesting anonymity. So far, petrol prices have jumped by ₹10.79 a litre in 70 days, while diesel prices have jumped by ₹8.99 after factoring in first rate cut by 16 paise on the fuel.
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Petrol is now priced at ₹101.19 per litre and diesel at 89.72 a litre in New Delhi. While fuel rates of state-run Indian Oil Corporation (IOC) in Delhi are the benchmark for the entire country, retail prices of the two fuels differ from place to place because of variations in state taxes and local levies. Petrol prices have already crossed ₹100 per litre in five metros – Delhi, Mumbai, Chennai, Kolkata and Bengaluru.
The cost of one litre of petrol in Mumbai is now ₹107.20 a litre and diesel, ₹97.29. The highest fuel rates have been recorded in Rajasthan’s Ganganagar where pumps are selling petrol at ₹112.53 per litre and diesel at ₹102.98 a litre.
Surging international oil rates and exorbitant domestic tax structure are two key reasons for high rates of petrol and diesel in pumps.
International oil prices showed extreme volatility last week. While an inconclusive meeting of producers’ cartel -- the Organisation of the Petroleum Exporting Countries and its allies, including Russia (together known as OPEC+) – over restraining output last Monday pulled down crude prices initially; falling US inventories and indications of strong demand from China and India saw prices rising again in the last two days of last week.
Benchmark Brent that surged $77 16 a barrel on the first day of the previous week, its highest since October 2018, fell over 4.8% in the next two sessions. It, however, gained 0.94% or 69 cents on Thursday and rallied 1.93% further on last Friday to close the week at $75.55 per barrel, still lower than the week’s high on Monday, July 5.
More downward price revision of auto fuels are expected if international oil prices soften further, executives mentioned above said. Brent that opened about 0.3% high at $75.79 a barrel on Monday, fell 0.2% to $75.4 during the early trade.
The diesel price reduction came at a time when India’s fuel demand show rapid recovery after the second wave of Covid-19 pandemic that hit the country in April and May months. Petroleum consumption in June recovered at 16.33 million tonnes, about 1.5% year-on-year growth and over 8% jump compared to the previous month. Demand of petroleum products had plunged a nine-month low in May 2021 at 15.11 million tonnes due to the lockdown in various places to contain the second wave.
While international oil prices impact pump rates of auto fuels because India imports more than 80% crude it processes, exorbitant taxes are the other reason for high rates of petrol and diesel.
In Delhi, central levies account for 33.29% of petrol’s price and state taxes, 23.07%, according to an official data of July 1. On diesel, central taxes are over 35.66% while state taxes are about 14.62%. 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 revenues hit on account of the pandemic.
The unrelenting upward movement of fuel rates since May 4 already saw petrol crossing ₹100 mark in various cities across the country, particularly in states and UTs of Maharashtra, Rajasthan, Andhra Pradesh, Madhya Pradesh, Karnataka, Telangana, Odisha, Manipur, Jammu & Kashmir, Laddakh, Punjab, Bihar, Kerala, Tamil Nadu, West Bengal, Chhattisgarh and Nagaland.
Some of the cities selling petrol for over ₹100 per litre are Mumbai, Ratnagiri, Parbhani, Aurangabad, Jaisalmer, Ganganagar, Banswara, Indore, Bhopal, Gwalior, Guntur, Kakinada, Chikmagalur, Shivamogga, Hyderabad, Leh, Imphal, Kalahandi, Sopore, Baramulla, Patna, Salem, Thiruvananthapuram, Mohali, Darjeeling, Dantewada and Kohima.
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.
