West Bengal, Tamil Nadu, Andhra Pradesh, Telengana, Kerala and Jharkhand haven’t reduced the value-added tax (VAT) on petroleum products in tandem with the excise cuts announced by the Centre in May 2022, leading to higher prices of petrol and diesel in those states, petroleum minister Hardeep Singh Puri said on Thursday. He was responding to questions raised by the Opposition parties about oil marketing companies (OMCs) not cutting retail fuel prices, even though global crude prices have softened in recent weeks.
He said the three state-run OMCs together suffered losses of Rs 27,276 crore due to high prices of crude in international markets. Currently, the petrol price in India is one of the lowest, Puri said.
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Though international crude prices have fallen 25% since the end of March 2022, state-run OMCs have kept retail prices of auto fuels on hold since May in a bid to recoup the losses incurred in the last two quarters, when crude prices remained at elevated levels.
Analysts do not expect these firms to cut rates in the near term either. They believe that it may take 2-3 quarters for the three OMCs – IOC, BPCL and HPCL – to offset losses incurred in the past quarters.
Puri, however, said while the average price of the Indian basket of crude oil increased by 102% (from $43.34 to $87.55) between November 2020 and November 2022, the retail prices of petrol and diesel have increased in India by only 18.95% and 26.5%, respectively, during this period.
The minister said prices of petrol and diesel have not been increased by public sector OMCs since April 6 despite record-high international prices.
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As a result, against the combined ‘profit before tax’ of Rs 28,360 crore in H1FY22, IOCL, BPCL and HPCL have booked a combined loss of Rs 27,276 crore in H1FY23,” he said.
The Centre cut excise (cess) in May, but it had raised it steeply earlier to raise additional fiscal resources during the pandemic period. Proceeds of cess are not required to be shared with states, although the state-level levies are applied on the value, including the central taxes, and so the states also benefit from central taxes.
At current level of international crude oil prices, OMCs are recovering around Rs 14 per litre on the sale of petrol. In March, when international crude oil prices were high, OMCs were losing `11-12/litre for both petrol and diesel. In June, under-recoveries were higher at Rs 17/litre for petrol and Rs 24/litre for diesel.
(With PTI inputs)
