Petrol price has been on a rise, and how. But unlike earlier, this time there has been no fuss around the increase in the price of a traditionally politically sensitive item, on which even a minuscule hike would lead to strikes and street protests in the good old times. Many of you might be surprised to know that this time petrol price has risen by a whopping Rs 5.27 per litre in less than two months, and that too barely to anyone’s notice.
The reason: Dynamic fuel pricing — a mechanism introduced on June 16 for revising retail fuel prices daily across the nation in conjunction with the change in the crude oil prices. Narendra Modi administration’s novel scheme — OK, not so novel after all, since it has been in practice in several other parts of the world — ensured that the customers, and more importantly, 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 June 28, petrol price in Delhi has risen by Rs 5.42 per litre to Rs 68.88 per litre today (Thursday, 24 August, 2017).
Where is all that money going? Well, the rising crude oil price is surely one factor. The price of the Indian basket of crude oil has risen by over 11% from $45.42 per barrel as on 27 June to $50.51 per barrel as on 23 August. The corresponding rise in the petrol price has been over 8.5%. But 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.
And while some might take comfort in the fact that the hike in petrol price is in line with the prices of crude oil, it might be important to note here that petrol cost lesser than this when the crude oil price was at over $140 per barrel. This begs the question of where is that additional money going? 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.