Oil marketing companies on Thursday reduced the prices of petrol and diesel, for the first time in over two months, citing a drop in their cost of production. Petrol price was cut by 21 paise per litre and diesel by 11 paise, a price notification issued by the firms said. This is the first price cut for the two auto fuels by OMCs, arising from a drop in international oil prices, after the global crude prices started rising since January.
Brent crude, the global benchmark, was down 94 cents at $79.11 a barrel late on Thursday. It has dropped by more than $7 from a high of $86.74 reached on October 3 amid rising US crude inventories, Saudi-US tension and falling Iranian exports.
The rates were reduced by a minimum Rs 2.50 per litre across the country on October 5, when the government cut the excise duty on petrol and diesel by Rs 1.50 a litre and asked oil PSUs to subsidise the fuels by another Rs 1 a litre. The reduction in the BJP-ruled states was more as they matched this cut by an equivalent reduction in local sales tax or VAT.
The government’s fuel subsidy bill this year is expected to be around Rs 21,000 crore higher than the nearly Rs 25,000 crore budgeted as the costlier crude inflated the subsidies on LPG and kerosene. The fuel subsidies have been coming down since the Rs 1.64-lakh-crore peak in FY13, thanks to the decontrol of the two auto fuels and softer crude.
The government had contemplated resumption of the practice of asking upstream companies like ONGC and OIL to share its fuel subsidy burden if the Indian basket of crude breaches $70 a barrel, but backtracked from the plan. A subsidy burden could have hit the state-run hydrocarbon producers’ all-important capex plans, especially since ONGC’s surplus cash had got depleted by Rs 12,000 crore due to its Rs 37,000-crore acquisition of HPCL last last fiscal.
Petrol in Delhi now costs Rs 82.62 per litre against Rs 82.83 a litre previously. A litre of diesel now costs Rs 75.58 as compared to Rs 75.69 previously. In Mumbai, petrol now costs Rs 88.08 per litre and diesel Rs 79.24.
The price cut follows international oil prices trading near the lowest level in a month on a bigger-than-expected gain in American stockpiles. West Texas Intermediate for November delivery traded 11 cents lower at $69.64 a barrel on the New York Mercantile Exchange, while Brent for December settlement was at $79.89 a barrel on the London-based ICE Futures Europe exchange. Brent had earlier this month hit a four-year high of $86.74 a barrel.
Prior to Thursday’s cut in rates, diesel price had risen by Rs 2.74 per litre since October 5 to more than wipe away the excise duty cut and oil firm subsidy. Petrol price had during this period risen by Rs 1.33 a litre.—FE