Petrol price deregulation, which aimed to link retail prices of the fuel with the market, seems to be getting implemented in a selective manner. While there is a faster pass-through of global crude prices into domestic petrol prices when crude prices rise, it is coming with a comparative lag when they are on a decline.
A look at the fuel price movement shows that in the period between May and September 2013 when the Brent crude prices rose by 12.8 per cent and rupee depreciated by over 10 per cent, price of domestic petrol went up by 20.6 per cent from Rs 63.09 per litre (in Delhi) in May 2013 to Rs 76.06 in September 2013.
However, between July and October 1 this year, while Brent crude price softened by 15 per cent from $110 per barrel to $94 per barrel amidst a stable rupee, the cut in petrol prices was only 7.8 per cent from Rs 73.6 per litre to Rs 67.86 per litre in Delhi.
If an immediate translation of rise in global prices reduces the under-recovery for oil marketing companies, a delay in passing on the benefit of falling prices results in an additional profit for the oil marketing companies. As a result, petrol price in October 2014 stood higher than that in May 2013 by 8 per cent, despite a lower global crude price now.
In May 2013 when Brent crude was hovering at $100-level and the rupee was trading at 56 to the dollar, the petrol price stood at Rs 63.09 per litre. But, on October 1, 2014 even as Brent dropped to $94.1 per barrel and rupee was trading at 61.31, petrol price dropped by only 65 paise to Rs 67.86 per litre.
Economists feel that the petrol prices can?t be kept high and will be eventually brought down. ?There could be some lag in transferring the benefits to the consumers but eventually they will have to come down in line with the drop in global crude oil prices and taking into account the exchange rate variation,? said DK Joshi, chief economist at Crisil.