Petrol prices hiked 17 paise/liter, diesel 21 paise/liter after Karnataka-polls
What's the story
After a 19-day pre-Karnataka poll hiatus, petrol price was today hiked by 17 paise/liter and diesel by 21 paise/liter as PSU oil firms began passing on the international rates spike to consumers. Petrol price in Delhi increased to Rs. 74.80/liter from Rs. 74.63 while diesel rates were jumped to Rs. 66.14/liter from Rs. 65.93. Diesel prices touched record high while petrol is at 56-month-peak.
Rates unchanged
Rates kept unchanged for three-weeks despite input cost spikes
The oil PSUs, which 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. 500cr as they absorbed higher cost resulting from the spike in international oil rates.
Fuel prices
Fuel prices being revised on daily basis since June 2017
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.
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Oil companies temporarily moderating fuel prices to avoid sharp spikes
Indian Oil Corporation (IOC) Chairman Sanjiv Singh last week said that the state-owned oil firms were "temporarily moderating" prices to avoid sharp spikes and panic among consumers.
Fuel prices revision
Fuel prices were last revised on April 24
Petrol and diesel prices were last revised on April 24 when they were hiked by 13 paise/liter each. But the prices of petrol and diesel were frozen thereafter. This came despite the benchmark international rate for petrol going up from $78.84 per barrel, which was used for raising the price to Rs. 74.63 per liter on April 24, to $82.98 now.
Int'l diesel rates
International diesel rates climbed from $84.68/barrel to $88.63
The benchmark international diesel rates during this period have climbed from $84.68 per barrel to $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/liter hike by not raising prices in line with cost.
Gujarat polls
Petrol prices cut by 1-3 paise/liter everyday before Gujarat polls
Interestingly, the prices at petrol pumps of state-owned fuel retailers like IOC were cut by 1-3 paise/liter every day in the first fortnight of December 2017 before Gujarat went to polls. However, they started moving up immediately after polling for Assembly elections in Gujarat concluded on December 14, leading to speculation that the government may have asked oil companies to hold the prices.
Rate revision practice
Oil companies dumped 15-year-old practice of revising rates in June
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've been increased by Rs. 1.5/liter in last 19 days, an analyst tracking the sector said.
Information
Petrol prices deregulated in 2010, while diesel in 2014
The government had in June 2010 freed petrol price from its control while 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.
Excise duty
Center raised excise duty 9 times between Nov'14 and Jan'16
Finance Secretary Hasmukh Adhia and Economic Affairs Secretary Subhash Garg have ruled out any immediate reduction in excise duty to cushion the increases warranted from a spike in international oil price. BJP-led government had raised excise duty 9 times between Nov'14 and Jan'16 to shore up finances as global oil prices fell but then cut tax just once in Oct'17 only by Rs. 2/liter.
Rise in excise duty
Excise-duty increased Rs. 11.77/liter on petrol, Rs. 13.47/liter on diesel
The government had between Nov'14-Jan'16 raised excise duty on petrol by Rs. 11.77/liter and on diesel by Rs. 13.47/liter to take away gains arising from plummeting global oil prices. This led to its excise mop up more than doubling to Rs. 2,42,000cr in 2016-17 from Rs. 99,000cr in 2014-15. However, a global rally in crude-prices pushed domestic fuel prices far higher than those levels.
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Central government cut excise duty by Rs. 2/liter in Oct'17
The central government had cut excise duty by Rs. 2/liter in Oct'17 when petrol price reached Rs. 70.88/liter in Delhi and diesel Rs. 59.14. Because of the reduction, diesel prices had on October 4, 2017, come down to Rs. 56.89/liter and petrol to Rs. 68.38/liter.