Even as stable fuel prices come as a big relief to consumers, the fact that retail petrol and diesel prices have not moved up over the last six weeks despite a 13.5 per cent jump in Brent crude oil prices that breached $75 per barrel mark on April 25 raises questions over the independence of oil marketing companies (OMCs) in price determination of petrol and diesel.
The trend during this election season is in sharp contrast to that seen seven months earlier, when oil marketing companies raised the retail fuel price by around 10 per cent between August 2018 and October 2018, following a 19 per cent jump in Brent crude oil prices in the same period.
While the Brent crude oil prices have risen over 13.5 per cent from $66.11 per barrel on March 15 to $75.2 per barrel on April 25, retail petrol prices in Delhi have gone up by just 0.5 per cent from Rs 72.55 per litre to Rs 72.95 per litre. Interestingly, in the same period, the price of diesel in Delhi has come down from Rs 67.22 per litre on March 15 to Rs 66.46 per litre on April 24.
Brent crude prices have shot up over the last few days, following the United States announcing that it will withdraw the waiver given to countries importing crude oil from Iran. Following the rise in crude oil prices, the rupee too has weakened against the dollar. On Thursday, the local currency fell 39 paise against the greenback. As rupee movement against US dollar is another key factor in determining the price of petrol and diesel, market participants say that a decline in rupee by 1.8 per cent over six week period from 68.96 to a dollar on March 15 to 70.25 on April 25, 2019, should have also ideally led to a hike in retail petrol and diesel prices. While market experts feel that the OMCs’ decision to hold on to any price rise of petrol and diesel despite a spike in global crude oil prices may be on account of ongoing elections, as fuel prices are known to hurt consumer sentiment, they feel that a strong inflow of foreign portfolio investors money over the last two months may have offered some respite to the OMCs, as it arrests the slide of rupee against the dollar.
It is important to note that while foreign portfolio investors pumped in a net of Rs 61,778 crore between March and April 2019 in Indian equity and debt markets, in the period between August 2018 and September 2018 they had pulled out a net of Rs 15,889 crore. So, while the rupee has fallen nearly 2 per cent over the last six weeks, it fell nearly 8 per cent between August and September 2018.
In October last, Petroleum and Natural Gas Minister Dharmendra Pradhan had said that the government does not interfere in the pricing of petroleum products, which had been deregulated, allowing state-owned retailers to fix rates based on the international benchmark.
As the OMCs raised the prices in line with the rising global crude oil prices and fall in rupee against the dollar in the period between August and October 2018 — with prices of petrol and diesel hitting a high of Rs 84 per litre and Rs 75.45 per litre, respectively, in Delhi— the government moved to cut excise duty on the fuels by Rs 1.50 a litre along with asking the state-owned oil PSUs to subsidise petrol and diesel by Re 1 per litre.
Emails sent to Indian Oil Corporation, HPCL and BPCL did not elicit any response.