The benchmark international diesel rates during this period have climbed from USD 84.68 per barrel to USD 87.14. Also, the rupee has weakened to Rs 66.62 to a US dollar from Rs 65.41, making imports costlier. Image source: Reuters
After deregulation, the government has given PSUs freedom to fix retail rates. However, the fact is that electoral compulsions still play a crucial role in price determination of petro products. The recent example of Karnataka assembly elections is an example of the same, as oil PSUs have shied away from hiking petrol and diesel prices since April 24, despite benchmark international product rates going up by nearly USD 3 per barrel. Centre has stated it has nothing to do with setting rates any longer. So, what is the real reason? The truth has been revealed by the IOC chief.
IOC Chairman Sanjiv Singh has said that the company has decided to "temporarily moderate" prices to avoid creating panic among consumers. However, he added that retail prices will rise if the current trend in international oil prices continues.
Speaking to media persons, Singh said, "We have decided to temporarily moderate retail prices by not passing on the required increase as we believe the current international oil product prices are not supported by fundamentals. So we have decided to wait for a while."
Singh added, "We can pass on daily spikes based on the freedom we have to revise prices on a daily basis. But we believe the surge in international oil products market is not supported by fundamentals and passing them on to consumers will unnecessarily create panic. So, we moderate to a certain extent so that peaks are avoided," he added.
However, it is obvious that oil PSUs will have to decide about raising the prices of these products, as deficit is piling up in their account.
Earlier, Union Finance Ministry refused to cut excise duty to give relief to common man after petrol hit a 55-month high of Rs 74.63 a litre, and diesel touched a record high of Rs 65.93. Since then, the oil PSUs have maintained a status quo, obviously, due to upcoming assembly polls in Karnataka.
It may be noted that the benchmark international diesel rates during this period have climbed from USD 84.68 per barrel to USD 87.14. Also, the rupee has weakened to Rs 66.62 to a US dollar from Rs 65.41, making imports costlier.
Shubhada Rao, Chief Economist, Yes Bank, told PTI that hardening of international crude oil price is likely to manifest itself via higher pressure on India's twin deficits along with inflation while also having a marginally negative spillover on overall growth momentum.
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Last month, Oil Minister Dharmendra Pradhan had 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 costs.
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