Petrol nears Rs 100/litre: What is fuelling the price?

With an increase in fuel prices for the fifth consecutive day this week, petrol is now priced at Rs 88.44 a litre and diesel at Rs 78.74 a litre in the national capital.

Business Desk, ETV Bharat: The price of petrol was raised on the fifth consecutive day this week taking it just Rs 5 short of Rs 100 per litre in Mumbai. In the same way, the Diesel prices are also maintaining its northward rally in the country’s financial capital closing on Rs 90 a litre.

Similarly, petrol is either over Rs 90 a litre mark or just a shade below that level in all other metros, while diesel is over Rs 80 a litre barring Delhi.

The last time the retail price of auto fuels were closer to current levels was on October 4, 2018 when crude prices had shot up USD 80 a barrel.

Petrol price was very close to breaching the all-time high levels in December 2020. But the march had been halted ever since then with no price revision by the oil marketing companies (OMCs) in the month. The price rise started again only on January 6.

Oil companies executives said that petrol and diesel prices may increase further in coming days as retail prices may have to be balanced in line with global developments to prevent OMCs from making losses on sale of auto fuels.

What is causing the price rise?

As India meets 85 per cent of the crude oil requirements through imports, domestic prices are sensitive to changes in the global crude market.

Retail prices of petrol and diesel are on the rise due to firm global prices with the benchmark Brent crude gaining over 2 per cent on Friday to cross USD 62 a barrel mark.

Crude price has remained firm for the last few weeks in wake of unilateral production cuts announced by Saudi Arabia and a pickup in consumption in all major economies globally.

The current price rise is also on account of high taxes on petrol and diesel by the Centre as well as State governments.

As per an estimate, Central Excise Duty and State Value Addition Tax constitute around 40 per cent and 23 per cent respectively of the retail price of petrol.

Centre rules out cut in taxes

On being asked in the Rajya Sabha whether the government has any proposal to reduce taxes to halt growing prices of petrol and diesel, the Union Minister for Petroleum and Natural Gas Dharmendhra Pradhan said that the government has no such proposal.

“This is an issue we have to tackle with utmost care. States are responsible and the union government is also responsible for this tax issue…we have raised the excise duty so states have raised the VAT also. Both the governments were raising (taxes) according to their own developmental needs. And, sometimes the Government of India has reduced excise duty also,” Pradhan said on Wednesday.

“In the last 300 days, for around 60 days price was increased, for around 7 days we decreased the petrol price and for almost all 250 days the price was put as usual,” he added.

Assam takes the lead in cutting taxes on fuel

Presenting the Vote on Account Budget for 2021-22, Finance Minister of Assam Himanta Biswa Sarma on Friday announced that the government will withdraw additional cess that was imposed on petrol and diesel during the pandemic.

“As a result, petrol and diesel will become cheaper by Rs 5 per litre effective from midnight tonight,” he told the Legislative Assembly.

The announcement comes months ahead of state Assembly elections that are likely to be held in next March-April.

(With inputs from agencies)