Petrol price in Mumbai is inching towards Rs 80 per litre as the Brent crude oil continues to rally above $68 per litre, after touching $70.37 on Monday, a three-year high, on back of global geopolitical risks, higher demands and production cuts. Today, the petrol price in Mumbai is Rs 79.58 per litre, while in Delhi, Kolkata and Chennai, it is Rs 71.70 per litre, Rs 74.42 and Rs 74.35. As the petrol price in Delhi has already touched a three-year high, the diesel price is at all time high at Rs 66.50 per litre in Mumbai, Rs 62.44 in Delhi, Rs 65.10 in Kolkata and Rs 65.83 in Chennai.
The petrol price and diesel prices in India have gone up by over Rs 3 per litre each in the last three months, while the Brent crude oil price rise has fluctuated between $13 per barrel to $15 per barrel. Interestingly, the Narendra Modi government announced an excise duty cut of Rs 2 per litre on both petrol and diesel on October 4, just before the petrol price in Mumbai was just 1 paisa short of hitting Rs 80 per litre. As a result, the fuel prices fell by Rs 2.5 per litre.
The impact of excise duty cut has been completely reversed due to the steep rise in the crude oil prices. The Brent Crude oil price is, in fact, expected to touch $80 per barrel, and the fuel price in India is going to rise further, unless there is some government intervention.
The central government on the back of low crude oil price three-year windfall, hiked excise duty on both petrol and diesel by Rs 12 per litre and Rs 13.77 between April 2014 and October 2017.
According to reports, the oil ministry recently indicated that the government may review the excise duty being levied on retail fuel when, and if, crude oil price touched $75 per barrel. As the Brent crude oil price is expected to rise further, one can expect petrol and diesel prices to go up as well — not quite pinching after daily revision kicked in, which allowed hike in prices in few paise every day, instead of big fortnightly hike.
As the fuel price is rising, the demand for bringing it under the Goods and Services Tax (GST) has been increasing. While the GST Council is likely to discuss bringing petrol and diesel under the GST, it may take some time.
Here’s why oil is on the boil
The rising crude oil price is likely to upset the fiscal math of Finance Minister Arun Jaitley. Moreover, it is further going to push up the inflation, which has already breached Reserve Bank of India’s 4% target. With rising oil prices, the repo rate cut by the central bank also looks unlikely, further impacting country’s investments and production cycle.