When India entered the daily revision dilemma for petrol and diesel prices, it was under the belief that things will turn out for the better for consumers, because that’s what the government had then assured. But what was supposed to be a major booster became a nightmare soon enough for Indian citizens, as they are now paying record high petrol and diesel prices. Petrol price was ruling at an all-time high of Rs 76.57 per litre in Delhi, having crossed the record set in September 2013 of Rs 76.06. This was after oilcos raised prices by 33 paise on Monday. On the other hand diesel prices hit Rs 67.82 per litre in the national capital after rates raised by 25 paise. In 8 days time, state-owned Oil companies have raised petrol and diesel prices by Rs 2 per litre each, and you will be shocked to know the rates that you pay now for these two products. Many expected the Karnataka poll to bring some good news however, with the prospects of an NDA government coming to power fading, things are not expected to get better.

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Let’s understand where petrol and diesel prices stand pre and post daily revision:

Today, petrol price in New Delhi stood at Rs 76.57 per litre, in Mumbai at Rs 84.40 per litre, in Kolkata at Rs 79.24 per litre and Rs 79.47 per litre.

From May 14 to till today, petrol prices have risen by Rs 1.92 per litre each in Mumbai and Kolkata, whereas New Delhi had a slightly higher hike of Rs 1.9 per litre and Chennai the most by Rs 2.04 per litre.

Coming to diesel prices, on Monday, this product was valued at Rs 67.82 per litre, at Rs 70.37 per litre in Kolkata and at Rs 71.59 per litre in Chennai. As for Mumbai, in this city diesel touched another new record high, as they are now priced at Rs 72.21 per litre. Diesel prices in India are at levels that have rarely been seen before.

From May 14 till today, diesel prices have risen by Rs 1.89 per litre each in New Delhi and Rs 1.74 per litre in Kolkata. Whereas, Mumbai and Chennai saw the most hikes - by as much as Rs 2.01 per litre and Rs 2.03 per litre respectively.

It needs to be noted that, the OMCs have started hiking petrol prices from May 14 onward, for the first time since April 24 after the conclusion of the Karnataka election voting.

Not even a year has passed when Oil Minister informed that they will enter daily revision of petrol and diesel prices. Dharmendra Pradhan, Minister of Petroleum of Natural Gas on June 16, 2017 tweeted, “With this historic step towards transparency and customer interest, the Indian Oil & Gas industry has joined the elite league of countries like USA and Australia wherein fuel prices are revised on a daily basis.”

If we look at the data given by Indian Oil, from June 16, 2017, petrol price have been increased by Rs 11.09 per litre in New Delhi, Rs 7.7 per litre in Mumbai, Rs 11.22 per litre in Kolkata, Rs 11.45 per litre in Chennai.

On June 16, 2017, we were paying Rs 65.48 per litre in New Delhi, Rs 76.70 per litre in Mumbai, Rs 68.03 per litre in Kolkata and Rs 68.02 per litre in Chennai.

You will be shocked to see the rise in diesel prices! In New Delhi diesel has surged by 13.33 per litre, in Kolkata by Rs 13.72 per litre, in Mumbai by Rs 12.31 per litre and in Chennai by Rs 14.18 per litre from June 16, 2017 till date. On June 16, you paid Rs 54.49 per litre for diesel in New Delhi, Rs 56.65 per litre in Kolkata, Rs 59.90 per litre in Mumbai and Rs 57.41 per litre in Chennai.

So far, the current situation is this that, brent crude oil has shoot up over $79 per barrel, whereas Indian government has ruled out possibility to ease excise duty. Also, many states are reluctant in reduce the Value Added Tax and the rupee has been hovering near 68-mark against US benchmark dollar index.

On Monday, Pradhan highlighted fuel price rose on the back decline in production in oil of Organisation of Petroleum Exporting Countries (OPEC) and hike in crude oil price in the international market. He said, “ts not in our hand. There is less production of oil in OPEC countries. The government will soon come out with a solution.”

Analysts at Equinomics Research & Advisory Private Limited showed that, US oil production rose again in the week ending May 11, reaching 10.723 million bpd. US production has steadily increased since OPEC engaged in a supply cut deal that sought to remove 1.8 million bpd from the market. At the time the deal was announced, the US was producing 8.6 million bpd.

They added, “Crude posted the longest stretch of weekly gains since 2011 as a result of OPEC’s production cuts. Brent posted a sixth straight weekly gain and rose 1.8% for the week and ended at $78.51 a barrel.”

Guess what! Relief is not under away anytime soon in your petrol and diesel prices. Morgan Stanley says, “We argue that middle distillate prices will need to rise to a level where demand slows. We suspect this will be the case when gasoil reaches ~$850/tonne,around 25-30% above today's level. We estimate this will drive Brent higher to ~$90/bbl.”

Harshad Katkar, Research Analysts at Deutsche Bank says, “We estimate OMCs marketing margin at c.INR -0.4/lit on gasoline (vs INR2.0/lit in 4QFY18 and INR1.1/lit in 3QFY18) and c.INR -0.1/lit on diesel (vs INR2.1/lit in 4QFY18 and INR0.8/lit in 3QFY18). We estimate auto-fuel margins at INR 1.7/lit in FY19e. Autofuel margins have averaged INR 1.6/lit in FY17 and INR 1.7/lit in FY18 as against INR 1.4/lit prior to deregulation.” 

In the midst of the above factors, Goods and Service Tax (GST) can come as a saviour for rising fuel prices. In wake of rising fuel prices due to uptick in crude oil rates, Pradhan has been appealing GST council to bring these two product under the umbrella of GST regime for ensuring uniform tax on them.

R A Sharma former chairman of ONGC earlier mentioned to Zee Business that such higher rise in tax on petrol and diesel will continue as it is not taken under the umbrella of GST.

If petrol and diesel price are brought under GST, that means the various taxes like excise duty, VAT, dealer commission levied on these products will be eliminated. This means then OMCs have only to take into consideration one tax and international crude oil rate for deciding the final retail prices.

There five tax bracket in GST currently 0%, 5% 12%, 18% and 28%.

What happens next with petrol and diesel prices will be keenly watched.