The prices at petrol pumps of state-owned fuel retailers like Indian Oil Corp (IOC) were cut by 1-3 paisa every day in the first fortnight of December last year.
Oil Minister Dharmendra Pradhan today said the government has not asked state-owned oil firms to defer raising the retail price of petrol and diesel ahead of elections in Karnataka. Incidentally, oil firms after keeping rates unchanged for a day, today cut petrol price by 4 paisa per litre and by 3 paisa in case of diesel despite firming international oil rates. The prices at petrol pumps of state-owned fuel retailers like Indian Oil Corp (IOC) were cut by 1-3 paisa every day in the first fortnight of December last year and rates started moving up immediately after polling for assembly elections in Gujarat concluded on December 14, leading to speculation that government may have asked oil companies to hold on to the prices. “There is no such direction (to hold price hike),” Pradhan told reporters here.
He said government has freed fuel pricing in a bid to bring competition and there is no going back on it. “It is well planned strategy of government that oil companies are fixing the fuel prices on the basis of international oil prices. If we dont bring competitor in the long term, then there would be no solution. Government has given freedom to oil companies,” he said. Pradhan said oil companies heads had yesterday stated that they have not got any direction from the government. “There are no directions from government to them,” he said.
The government reportedly had informally directed state-owned fuel retailers not to raise petrol and diesel prices in the run-up to the December 2017 assembly elections in Gujarat. By some accounts, as much as 45 paisa increase warranted in petrol and diesel rates was not passed on. This time around IOC, Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL) have reportedly been asked to absorb up to Re 1 a litre hike. “No, we haven’t heard from the government anything (on dropping daily price revision),” IOC Chairman Sanjiv Singh had stated yesterday.
HPCL Chairman and Managing Director M K Surana too said the company is not aware of any directive to oil companies not to pass on the rise in international oil prices. The government had in June 2010 freed petrol price from its control and the diesel rates were deregulated in October 2014. Prices have since then moved more or less in tandem with international rates barring a few exceptions like the period before a crucial election. State-owned oil companies in June last year dumped the 15-year old practice of revising rates on 1st and 16th of every month and instead adopted a dynamic daily price revision to instantly reflect changes in cost. Incidentally, oil companies did not change rates at their pumps yesterday. Today, petrol price was cut by 4 paisa to Rs 73.94 a litre, while diesel rate was cut by 3 paisa to Rs 64.93.
After hitting a low of USD 27.1 per barrel in 2016, Brent crude is currently trading around USD 70 level. Finance Secretary Hasmukh Adhia had last week ruled out any immediate reduction in excise duty to cushion the increases warranted from rise in international oil price. The BJP-led government had raised excise duty nine times between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre.
The government had between November 2014 and January 2016 raised excise duty, taking away gains arising from plummeting global oil prices. In all, duty on petrol rate was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months that helped government’s excise mop up more than double to Rs 2,42,000 crore in 2016-17 from Rs 99,000 crore in 2014-15. The central government had cut excise duty by Rs 2 per litre in October 2017, when petrol price reached Rs 70.88 per litre in Delhi and diesel Rs 59.14. Because of the reduction in excise duty, diesel prices had on October 4, 2017 come down to Rs 56.89 per litre and petrol to Rs 68.38 per litre. However, a global rally in crude prices pushed domestic fuel prices far higher than those levels.