Petrol and diesel prices are on a sustained rise of late, but this time it’s not much to the notice of the people at large, as FE Online has repeatedly pointed out in the recent past. Amid the continuing rally, the retail fuel prices have touched a key milestone, that of hitting three-year highs in several cities across the country.
The price of 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. 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.
The fall, and rise
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.
However, over a longer time horizon, the rise in the prices of retail fuel is not apparently in sync with the movement in the crude oil prices. While the price of crude oil, the main raw material from which petrol is extracted, is down by as much as 60% in the last nine years, the retail price of petrol has risen by about 45% during the same period.
As FE Online wrote earlier, crude oil price is not the only factor affecting the retail fuel prices. Read here what all goes into pricing the increase or decrease in the petrol and diesel prices. Of course, a big part — more than half of the price that you pay for petrol and diesel — consists of various centre and state taxes, which remain there even after the implementation of GST, as the two commodities were kept out of the ambit of the most radical tax reform that India has ever seen since independence.