Even as Dharmendra Pradhan has said that affordability is of utmost importance to public policy, he has denied reports that the government has asked state-owned oil companies absorb fuel price hike. CNBC-TV18 reported that Dharmendra Pradhan said that no order has been given to PSU refiners to absorb fuel price hike. Fuel prices have surged on the back of rallying crude oil prices and are looking at a five year high.
Earlier yesterday, oil companies too denied any such communication from the government. PTI reported that heads of both IOC and HPCL have denied the reports of government asking them to avoid raising auto fuel prices. Bloomberg on Wednesday citing two unidentified sources reported that the government has asked oil companies to bear a loss of up to Rs 1 per litre on the sale of diesel and gasoline.
While Bloomberg did not mention the same about the petrol price, some reports said that the government asked oil companies to put a hold on petrol price hike as well. The international oil price this year is having quite a roller-coaster ride. After surging to $70 per barrel in the third week of January, the Brent crude oil price fell for a few weeks and surged back up to a high since 2014 at over $73 a barrel.
In India, after deregulation of fuel prices in 2010, oil companies take a call on whether or not — and by how much — to hike the prices. While international crude oil price is not the only factor influencing the fuel price hike, it certainly is one of the major factors. Since June 16, last year, the oil companies decided to hike fuel prices on a daily basis instead of doing it fortnightly in line with the international practice.
To cushion the impact of fuel price hike, the government last October announced a cut in excise duty by Rs 2 per litre on both petrol and diesel, followed by VAT cuts by four states. However, the benefit was reversed within months. While it was widely anticipated that the government will announce some relief in the Budget, it is understood tight fiscal situation did not leave any room to do so. Later, Arun Jaitley, in a post-Budget interview with DD News, said indicated that he has no provision in the Budget regarding the risks posed by rising crude oil prices.