Petrol price hikes hit hard! Rates jumped by Rs 1.35 in just 6 days; Mumbai nears Rs 84 mark
Controlling the rise of petrol prices has become crucial for the NDA government as 2019 election looming.
Each coming day we are paying a higher amount for fuel and no relief is looming on the horizon as the government is refusing to step in to cap them. petrol prices, which are ruling at a 5-year high in India and what is more consumers may soon even have to pay Rs 84 per litre for purchasing petrol in Mumbai. We do know the reasons behind these hikes, but the jump is quite shocking. So far, we know it is brent crude oil has shoot up near $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. Controlling the rise of petrol prices has become crucial for the NDA government as 2019 election looming.
Let’s understand what’s really cooking with petrol prices.
Today the petrol price of New Delhi stands at Rs 75.91 per litre higher by 30 basis points compared to previous day price of Rs 75.61 per litre. The price in the national capital is at the edge of reaching another of Rs 76 per litre.
Going ahead India’s financial hub Mumbai has witnessed a situation where petrol price has hit Rs 83.75 per litre today, which is also up 30 paise against previous day price of Rs 83.45 per litre. This city has the most expensive petrol price, and looks like the good days are not near soon, as it is heading for Rs 84 per litre mark.
Furthermore, Chennai saw the most hike in it’s prices to Rs 78.78 per litre on Saturday, above 32 paisa compared to previous price of Rs 78.46 per litre.
The current level of above mentioned three cities is already at five year highs as last time this trend was recorded in September 2013.
Now in Kolkata, the price were raised by 30 paisa to Rs 78.59 per litre as against Rs 78.29 per litre of previous day. This city’s price is nearly five-year high as last time it stood at this level in December 2013.
However, today’s hike is despite Brent crude futures fell 79 cents, or 1%, to settle at $78.51 a barrel on Friday. This commodity has broke through $80 a barrel for the first time since November 2014, and investors anticipate more gains due to supply concerns, at least in the short term.
Brent crude oil has surged by nearly 17.5% since start of 2018.
It needs to be noted that, the OMCs have started hiking petrol prices from Monday onward, for the first time since April 24 after the conclusion of the Karnataka election voting.
Indian OMCs disposed of the daily revision in fuel prices that was being carried out from June 2017. The idea of daily revision was to link it with continuous change in global crude oil price, however, that is currently not on the table as the price has soared to over $84 per barrel mark which is highest since 2014 and no intervention from OMCs has been forthcoming.
Therefore, from May 14 to till today, petrol prices have rose by Rs 1.27 per litre each in Mumbai and Kolkata, whereas New Delhi had slightly higher hike by Rs 1.28 per litre and Chennai the most by Rs 1.35 per litre.
Indian Oil Corp (IOCL) provides the break up of final retail prices of petrol, and under today’s data surprisingly, brent crude accounted only 48.30% of final petrol retail price, whereas taxes like excise duty, dealer commission and VAT accounted nearly 52% of price.
This means taxes continue to tamper Indian petrol prices, as government believes the rates have not touched levels that could trigger such an action.
Meanwhile, Oil Minister Dharmendra Pradhan has appealed to GST council in bringing fuel prices under one-tax system.
Analysts at JM Financial said, “We find that with every USD 5/bbl rise in the crude price, diesel (petrol) prices increase by c. INR 2.65 (2.7) /litre (higher by 4%/3.6%) assuming 100% pass-through. Even as the govt. has refused to cut excise rates on fuel currently, our sensitivity analysis shows that a restricted pass-through to consumers and cuts in fuel excise duties could worsen the Centre’s fiscal by upto 60bps of GDP if 100% of the burden is borne by the Centre in FY19.”
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.”
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.