Petrol and diesel prices may rise again after daily price revision restarts

Petrol, diesel prices have already been increased at several cities due to a hike in VAT.

petrol, diesel price
petrol, diesel price

Fuel consumers and daily travellers should brace themselves for spending more on fuel as public sector oil marketing companies (OMCs) are bracing to restart daily price revision of retail price of petrol and diesel. This move could come as soon as the end of this month. This is being done in an attempt to shore up revenues as demand remains subdued due to the lockdown.

Sources in OMCs said the daily price revision of auto fuels may start again once the lockdown is lifted or more relaxations are announced by the government later in the month. However, no decision has been taken on it as of now. This step could lead to petrol and diesel prices rising again every day as global oil market has also studied gaining more than 50% over last month’s prices to around $30 a barrel now.

“Petrol and diesel prices have not been revised since 16 March (it went up in Delhi on May 5 only after the state government raised VAT) and that gave cushion to the government to steeply raise excise duty on the two products without impacting their retail prices. But that cushion is no longer there now and once daily price revision plan starts, auto fuel could see steep rise over the course of few days,” said an official of a public sector OMC asking not to be named.

However, government sources indicated that the retail price of petrol and diesel may not be allowed to increase beyond a point even if the daily price revision restarts. This would mean that the petroleum products could increase marginally every day by 30-50 paisa or even lower till the oil companies are able to eliminate the gap between cost and sales.

The increase in retail price under daily price revision would depend on prevailing oil prices and global oil market at the time of determining the retail price. Going by the current trend, crude prices are up over 50% to last month’s prices when even benchmark Brent crude had slipped below $ 20 a barrel. It is at $30 a barrel now. But lockdown has also curbed demand for auto fuel. This could maintain some check on prices. Petrol is retailing at Rs 71.26 a litre while diesel at Rs 69.39 a litre in Delhi. Before this the two maintained a price of Rs 69.59 and 62.28 between March 16 and 4 May.

The price rise to the current level in Delhi from May 5 as the state government raised VAT on the products to raise revenue to meet rising expenditure needs to check Covid-19 spread. Raising retail prices has also become important for OMCs now as the recent steel excise duty hike without resultant increase in petrol and fiscal prices, has substantially brought down its marketing margins from record high level of Rs 12-18 per litre. (With agency inputs)