Petrol, diesel prices trade at record highs; top 5 points to note
Beginning 2014, when Brent crude prices started crashing, petrol and diesel prices back home were supposed to come down too. However, instead of that, government hiked excise duty on fuel nine times between November 2014 and January 2016, not passing on the benefit to consumers.
Petrol and diesel prices are ruling at record high levels with the oil marketing companies raising them for the ninth straight day. With this, petrol prices in Delhi today stood at Rs 76.57, rising Rs 2.24 per litre in the last nine days, while diesel price was increased by Rs 2.15 during the same period to Rs 76.87 today.
The key point here is the prices today are way higher than what consumers paid when the global Brent crude was trading above $100 per barrel. Brent crude is hovering around $80 for the last few days.
Beginning 2014, when Brent crude prices started crashing, petrol and diesel prices back home were supposed to come down too. However, instead of that, government hiked excise duty on fuel nine times between November 2014 and January 2016, not passing on the benefit to consumers. Since then, the excise duty has been reduced only once in October last year. However, alongside, the road cess had been increased, making the effective tax almost unchanged.
Notably, petrol prices had been deregulated on June 25, 2010, with the government allowing the OMCs to revise rates in periodic manner. Before that, the government used to subsidise OMCs for the difference between the retail selling price and the price borne by them. This subsidy was called under-recovery. The subsidy on diesel was withdrawn on October 18, 2014.
Here are key developments, top facts and reactions around surge in fuel prices:
1) "Over the last few years, falling oil prices contributed significantly towards improving the health of the economy. With global oil prices once again spiralling upwards, the macroeconomic risks of higher inflation, higher trade deficit and pressure on balance of payments with attended consequences for the Rupee value have once again surfaced," said Ficci President Rashesh Shah.
2) "While cut in excise duty on petrol and diesel may provide temporary relief to the consumers, the sustainable solution lies in the automobile fuel coming under the Goods and Services Tax, which can happen only after the Centre and states together reduce their dependence on the fuel considerably," said D S Rawat, Secretary General of Assocham.
3) A report prepared by Chief Economist Soumya Kanti Ghosh at the State Bank of India said that a $10-a-barrel increase in crude oil price increases India’s import bill by around $8 billion. This would slow down the country’s Gross Domestic Product by 16 basis points and push up the fiscal deficit by eight basis points, the report added.
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4) The government is considering ways to keep rising transport fuel prices in check, Petroleum Minister Dharmendra Pradhan said on Monday. "Various alternatives are being looked at," Pradhan told reporters, adding that he would "work out something soon", but did not provide further details.
5) International crude oil prices are now $80 a barrel. During 2009, they were ruling at over $120 a barrel, after peaking in 2008 at $147.3 a barrel.