Petrol, diesel rates may increase as global oil prices record spike
State-run fuel retailers may raise petrol and diesel rates soon due to rising international oil prices, bringing to an end about the month-long relief to consumers — initially due to small price cuts, and then maintaining pump prices for about two weeks, people aware of the development said.
Retail prices of petrol and diesel are likely to be affected with the surge in international oil prices which have increased by around $3 per barrel in the last 10 days, the people cited above said on condition of anonymity.
“In case international crude oil prices continue to remain at such high levels, an increase in retail prices going forward will be inevitable,” a person working in an oil company said.
Benchmark crude Brent surged last week to $75.34 per barrel on Friday close, over 9.1% jump compared to $69.03 a month ago.
As international oil prices dropped below $70 a barrel in mid-August, fuel retailers 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 became 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 6. On Sunday, petrol was priced at ₹101.19 per litre in Delhi and diesel at ₹88.62 per litre.
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” a second person cited 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 the auto fuels.
Through 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% 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 high incidence of taxes and a spike in international oil prices, petrol and diesel rates had soared to 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 rupee is depreciating against dollar.
India imports more than 80% crude oil it processes and pays in dollars. In Delhi, central levies account for over 32.5% of petrol’s price, and state taxes (VAT) 23.07%. On diesel, the central excise is over 35.8% while VAT is more than 14.6%.