Crude prices down but retail prices of fuels remain high

Shishir Sinha | | Updated on: Dec 05, 2021
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The reprieve consumers have got is from cuts in Central, State levies


Petrol/diesel consumers are yet to get the benefit of easing international crude oil prices. The last reduction in retail prices was mainly on account of cut in Central and State levies.

According to the Petroleum Planning and Analysis Cell (PPAC), the daily price of crude oil (Indian Basket) has gone below $70 a barrel now. The average daily price in October was over $82 and over $80 in November. The Indian crude Basket represents a derived basket comprising Sour grade (Oman and Dubai average) and Sweet grade (Brent Dated) processed in Indian refineries in the ratio of 75.62:24.38 during 2019-20.

Sources close to oil marketing companies say crude was procured at a higher price some time back and that inventory still impacts retail prices. Retail prices have not been revised on account of the current easing of crude purchases at the earlier price. However, sources said, if the downward spiral in prices continues for sometime, then consumers might benefit.

On November 3, the Centre cut the Road and Infrastructure Cess by ₹5 and ₹10 on petrol and diesel, respectively. Many States followed suit. The Delhi Government is the latest to join by cutting the Value Added Tax (VAT). Together, these brought down the retail prices by up to ₹19 a litre. However, since November 4, Oil Marketing Companies have adjusted the price on account of tax change and not because a reduction in oil prices.

New initiatives by major consumers raised the hope of an impact on crude prices. Considering the stance of oil producing companies not increasing the output, as demanded, India along with other major consumers including the US, China, Japan and the Republic of Korea, have decided to release some quantities from their strategic petroleum reserves. For India, it would be 5 million barrels.

Recently, in a written reply in the Rajya Sabha, Minister of State for Petroleum and Natural Gas Rameswar Teli said that prices of petrol and diesel are market-determined with effect from June 26, 2010 and October 19, 2014, respectively. Since then, Public Sector Oil Marketing Companies take appropriate decision on pricing of petrol and diesel in line with their international product prices, exchange rates, tax structure, inland freight and other cost elements.

The prices of petroleum products in the country are linked to the price of respective products in the international market. However, the government continues to modulate the effective price to consumer for Subsidised Domestic LPG and Retail Selling Price of PDS kerosene, he added.


Published on December 05, 2021

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