After a 19-day pre-Karnataka poll hiatus, petrol price was on Monday hiked by 17 paise a litre and diesel by 21 paise as PSU oil firms began passing on the spike witnessed in international rates to consumers. Petrol price in Delhi was hiked to Rs 74.80 per litre from Rs 74.63 while diesel rates were increased to Rs 66.14 a litre from Rs 65.93, according to a price notification issued by state-owned oil marketing companies.
With this, diesel prices have touched a record high while petrol is at a 56-month peak. Oil PSUs, who had kept rates unchanged for nearly three weeks before Karnataka went to polls despite input cost spiking, reverted to daily revision in prices no sooner had the state voted to elect a new government on Saturday.
State-owned oil marketing companies are estimated to have lost about Rs 500 crore as they absorbed higher cost resulting from the spike in international oil rates and fall in rupee against the US dollar. Oil PSUs, which have been since June last year revising auto fuel prices on a daily basis to reflect changes in the cost, have kept pump rates static since April 24, an analysis of daily price notification issued by oil companies showed.
Oil PSUs have refused to acknowledge if the freeze followed a government diktat so as to help ruling BJP in Karnataka. Indian Oil Corp (IOC) Chairman Sanjiv Singh last week said that the state-owned firms were “temporarily moderating” prices to avoid sharp spikes and panic among consumers.
Petrol and diesel prices were last revised on April 24 when they were hiked by 13 paise each. But prices were frozen thereafter. This despite benchmark international rate for petrol going up from USD 78.84 per barrel, which was used for raising the price to Rs 74.63 a litre on April 24, to USD 82.98 now, according to sources privy to fuel pricing methodology. The benchmark international diesel rates during this period have climbed from USD 84.68 per barrel to USD 88.63. Also, the rupee has weakened to Rs 67 per US dollar from Rs 66.62, making imports costlier.
Oil Minister Dharmendra Pradhan had last month denied reports of a directive to state oil firms to absorb at least Re 1 a litre hike by not raising prices in line with cost. The prices at petrol pumps of state-owned fuel retailers like Indian Oil Corp (IOC) were cut by 1-3 paise every day in the first fortnight of December 2017 before Gujarat went to polls.
They started moving up immediately after polling for assembly elections in Gujarat concluded on December 14, leading to speculation that government may have asked oil companies to hold the prices. State-owned oil companies in June last year dumped the 15-year old practice of revising rates on 1st and 16th of every month and instead adopted a dynamic daily price revision to instantly reflect changes in cost. If this practice was followed in letter and spirit, petrol and diesel prices should have been increased by Rs 1.5 a litre in last 19 days, an analyst tracking the sector said.
The government had in June 2010 freed petrol price from its control and the diesel rates were deregulated in October 2014. Prices have since then moved more or less in tandem with international rates barring a few exceptions like the period before a crucial election. Finance Secretary Hasmukh Adhia and Economic Affairs Secretary Subhash Garg have in the past weeks ruled out any immediate reduction in excise duty to cushion the increases warranted from a spike in international oil price.
The BJP-led government had raised excise duty nine times between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre. The government had between November 2014 and January 2016 raised excise duty on petrol by Rs 11.77 a litre and that on diesel by Rs 13.47 per litre to take away gains arising from plummeting global oil prices.
This led to its excise mop up more than doubling to Rs 2,42,000 crore in 2016-17 from Rs 99,000 crore in 2014-15. The central government had cut excise duty by Rs 2 per litre in October 2017, when petrol price reached Rs 70.88 per litre in Delhi and diesel Rs 59.14. Because of the reduction in excise duty, diesel prices had on October 4, 2017, come down to Rs 56.89 per litre and petrol to Rs 68.38 per litre. However, a global rally in crude prices pushed domestic fuel prices far higher than those levels.