As the petrol and diesel prices have hit three-year highs in some cities, the government seems to have swung into action to protect the consumers from the rising fuel bills, possibly bringing back the ghosts of the era of regulation.
Not only is the government assessing the trajectory of oil prices, it may ask the oil marketing companies to absorb further increase in global crude oil prices, news channels ET Now and CNBC TV18 reported on Wednesday citing unidentified government sources. The government is unlikely to pass further rise in fuel prices due to higher inflation, the reports added.
The possible government intervention to keep the retail fuel prices in check comes after the news reports highlighted that the petrol and diesel prices have risen to the levels last seen three years ago in metro cities of Mumbai, Kolkata and Chennai, only, without the people noticing it much this time.
Up, and away
The petrol in Mumbai has risen to Rs 79.48 per litre, a level last seen in August 2014 in the country’s financial capital. Similarly, the price of diesel is at a three-year high in the metro cities of Kolkata and Chennai at Rs 61.37 and 61.84 per litre respectively. Retail fuel prices are on an steady upmove, rising in small doses almost everyday since the introduction of the dynamic fuel price revision mechanism nationwide in June this year.
If the government does intervene to check the fuel prices, it will bring back the memories of the days when petrol and diesel price movements were much hyped events with the government dictating how much the oil refining and marketing companies could charge. The price of petrol was under the government control when the crude oil was at its peak.
Biting the bullet, the government deregulated the price of the fuel from its control in 2010, allowing the oil refining and marketing companies to set it in line with the market dynamics, specially crude oil prices. Following that, the price of petrol rose in line with the rise in crude oil prices till the early 2013.
However, the crude oil prices began falling after that, but the petrol prices either kept increasing, or kept steady in spells. And now petrol still trades firm, while crude oil price is under a huge pressure. Not to mention the support to oil downstream companies from a firm rupee, which is up 6.3% so far this year, resulting in lower expenses for them per dollar spent on buying crude oil.
Earlier this year, the government introduced dynamic fuel pricing on June 16 — a mechanism for revising retail fuel prices daily across the nation in conjunction with the change in the crude oil prices. Narendra Modi administration’s scheme ensured that the oil marketing companies do not feel the pinch of keeping fuel prices static for up to 15 day even if the crude oil starts rising rapidly, as was the earlier practice.
Immediate price cuts followed. Petrol prices fell by Rs 3.45 per litre in just a span of 13 days, with the oil companies cutting prices or keeping it unchanged for 12 days in a row. Then, it started rising, beginning with a humble 1 paisa per litre hike on June 28-29 — an amount not worth batting an eyelid.
Petrol price has been on the upmove since then, with the oil companies continuously raising it in small doses everyday, barring a few even smaller cuts in between. Since July 1, petrol price in Delhi has risen by Rs 7.29 per litre to Rs 70.38 per litre today (Wednesday, 13 September, 2017), though this seems to be in line with the over 12% rise in the prices of the Indian basket of crude oil in rupee terms during the same period.