Oil companies on Saturday raised petrol prices by 24 paise per litre and diesel by 15 paise a litre, making the two fuels costlier by ₹4.87 per litre and ₹4.99 in just one month. With the 16th price hike in the current month, petrol was sold at record ₹91.17 per litre in Delhi on Saturday and diesel at ₹81.47 a litre, just 50 paise short of the all-time high. Diesel was sold at record ₹81.94 per litre on July 30, 2020 in Delhi.
Domestic fuel retailers raised petrol and diesel rates on Saturday, even as international crude oil prices fell on Friday because of the strengthening dollar. Benchmark Brent crude on Friday closed at $66.13 per barrel, down by 1.12%. However, Brent crude surged by over 18% in February on supply disruptions in the US and a rapid demand recovery with the launch of Covid-19 vaccination programmes.
According to the latest data released on Friday, the Indian economy has come out of contraction zone after the easing of lockdown restrictions and resumption of economic activities. India’s gross domestic product (GDP) grew at 0.4% on a year-on-year basis in the third quarter ending December 2020, after the economy suffered an annual contraction of 24.4% and 7.3% successively in the two preceding quarters because of a 68-day hard lockdown to contain the spread of Covid-19.
“Petrol and diesel are deregulated fuels. Public sector oil marketing companies (OMCs) take appropriate decision on pricing of petrol and diesel in line with international prices of petrol and diesel, and not with international crude price,” an oil ministry official said on condition of anonymity. The government deregulated the pricing of petrol on June 26, 2010 and diesel on October 19, 2014.
State-run OMCs on June 16, 2017 implemented daily revision of petrol and diesel rates across the country. India’s fuel retail market is dominated by three state-run OMCs – Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) — with almost 90% market share.
Two executives working in state-run oil companies said retail prices of petrol and diesel are rising because of supply squeeze by producers’ cartel and high taxes on the two fuels by the Centre and states. The Organisation of the Petroleum Exporting Countries and its allies (Opec+) on April 12 last year announced an unprecedented 9.7 million barrel per day cut in oil output, a 10th of the global output, from May 1, 2020, but did not adhere to the planned restoration of the supply reduction.
The other reason for high prices of petrol and diesel is central and state levies. According to IOC, while basic price of petrol is ₹31.82 per litre in Delhi, total levies on every litre of the fuel add up to ₹53.51 (central excise of ₹32.90 per litre and value-added tax of ₹20.61 a litre). Similarly, basic rate of diesel in Delhi is 33.46 per litre, but total tax on it is ₹43.48 per litre (central excise of ₹31.80 per litre and value-added tax of ₹11.68 a litre). Petrol and diesel rates vary across the country because of different value-added tax (VAT) and local levies.