Govt further hikes duty on petrol, diesel as OMCs cut prices

Retail prices of petrol and diesel will remain unchanged despite a downward revision in prices by oil marketing companies as an increase in excise duty by the government has offset the reduction in prices.

State-run oil marketing companies have announced a reduction in the retail selling prices of petrol and diesel by Rs2 each per litre effective today after the international price of crude oil slumped to about $46 per barrel.

Accordingly, the retail prices of petrol and diesel in Delhi should have come down by Rs2.00 per litre (including state levies) with corresponding decreases in other states.

However, a finance ministry notification said excise duty on unbranded petrol is being hiked to Rs8.95 per litre and that on unbranded diesel to Rs7.96 per litre, which denied the gains to the consumer.

This is the fourth increase in excise duty on the two fuels since November, which have cumulatively taken away the benefit of a reduction of Rs7.75 per litre in petrol and Rs6.50 per litre in diesel rates.

The four excise duty hikes will help the government raise about Rs20,000 crore in additional revenue this fiscal, enabling it to meet its fiscal deficit target of 4.1 per cent of the GDP.

Petroleum minister Dharmendra Pradhan today tried to deflect criticism over the excise duty hike saying there has not been any price cut so far and that state-owned firms will do what is "appropriate".

While the fall in global oil rates is a boon for consumers, for oil companies it has meant over Rs12,000 crore of inventory losses.

The crude oil that is being processed currently in refineries is one that was bought about 6-8 weeks back when rates were higher than present prices. By the time it is processed and marketed its market value would have come down, resulting in inventory losses.

Indian Oil Corporation, the country's largest oil marketing company, had announced a reduction in the prices of of both petrol and diesel, effective midnight of 15-16 January,

IOC said petrol will cost Rs61.33 per litre in Delhi while it will cost Rs68.66 per litre in Kolkata, Rs68.86 per litre in Mumbai and Rs63.94 in Chennai.

Diesel price in Delhi has come down to Rs50.51 per litre, while it costs Rs55.00 in Kolkata, Rs57.91 in Mumbai and Rs53.78 in Chennai.   

The prices of petrol and diesel were last revised downwards on 1 December 2014 by Rs0.91 per litre and Rs0.84 per litre, respectively (including state levies at Delhi) on the back of declining international oil prices.

Since the above price changes, the international prices of both petrol and diesel have continued to be on a downtrend.

The rupee-dollar exchange rate has, however, appreciated since the last price change. The combined impact of both these factors warranted a decrease in retail selling prices of both petrol and diesel, IOC stated in its release.

IOC said oil marketing companies will closely monitor the movement of prices in the international oil market and rupee-dollar exchange rate and developing trends of the market will be reflected in future price changes.