As global crude oil prices slumped to a five-year low of $59.18 a barrel, oil retailers slashed the price of diesel and petrol by R2 on Monday. Petrol in Delhi now costs R61.33 a litre, the lowest in 43 months. Diesel now costs 50.51 a litre in Delhi, lowest since July 2013. Monday’s cut was the eighth straight reduction in petrol prices since August, and fourth in diesel since October.
But the government on December 2 raised basic excise duty on petrol and diesel for the second time in two weeks to mop up gains made by fuel retailers. The government is estimated to collect over R20,000 crore from the two rounds of excise duty revisions.
India imports 80% of its crude oil requirements and it accounts for over 30% of its total import bill. According to a Citi Research note, a $1/bbl decline in oil prices would reduce India’s trade deficit by $900 million. On a macro level, given softer crude prices and a likely moderation in demand due to recent fuel price reforms, India’s net oil import bill in FY15 is likely to be $87 billion or 15% lower than $102.5 billion in FY14.