Oil at $84 again: Petrol, diesel price on hold for 68th day in a row

Petrol and diesel prices have remained unchanged for 68 days in a row despite a USD 16 swing in international oil prices and global rates again climbing to USD 84 per barrel, oil company data showed.

Petrol and diesel were last changed on November 4, 2021, when the central government cut excise duty to give relief from rates that had touched an all-time high.

This is the longest duration of no-change in prices since the daily price revision was introduced in June 2017, the data showed.

Prior to that, there was an 82-day hiatus in rate revision between March 17, 2020, and June 6, 2020.

On November 4, 2021, excise duty on diesel was cut by Rs 10 a litre and that on petrol by Rs 5 per litre, resulting in an equivalent reduction in retail pump rates.

On that day, some states, mostly ruled by the BJP, cut local sales tax or VAT to give larger relief to consumers. Other states like Punjab and Delhi followed suit at later dates but the base price of petrol and diesel has remained unchanged since November 4, 2021.

Petrol costs Rs 95.41 a litre in Delhi and diesel is priced at Rs 86.67, price information from state fuel retailers showed.

The rates have remained unchanged despite a wild swing in international oil prices. Brent crude oil, the best-known international benchmark, was at USD 82.74 per barrel on November 5, 2021, before it started to fall and touch USD 68.87 a barrel on December 1.

Rates started to rise thereafter and on Wednesday soared to USD 83.82 per barrel, not very low from the peak of USD 86.40 touched on October 26, 2021, which had led to petrol and diesel prices spiking to an all-time high.

International oil has roared higher as concerns about the pandemic, especially the impact of the omicron variant, have eased off.

Before the excise duty cut, petrol and diesel prices had touched an all-time high across the country. While petrol had crossed the Rs 100 a litre mark in most cities, diesel was above that level in nearly half the country.

In Delhi, petrol came for Rs 110.04 a litre and diesel for Rs 98.42.

"The government faced a lot of criticism because of the rising pricing then. In weeks and months leading to record rates, it resisted cutting taxes but had to do that once BJP faced electoral reversals in by-elections in some states," a senior oil company executive said on condition of anonymity.

And, with Assembly elections to five states including Uttar Pradesh and Punjab round the corner, it does not want to give opposition parties any ammunition and so rates are not being aligned with the cost, he said.

"Of course, there are other factors that are dictating retail pricing. It is for anyone to guess what they are," another oil company official said.

No official from the three state-owned oil marketing companies was willing to speak on the record on fuel pricing.

"Clearly, retail pump prices are at variance with the cost. So, when international oil prices climbed, not all of the increase was passed on to consumers. And, so when the international oil prices dipped to USD 68, they did not cut petrol and diesel prices and instead adjusted for the previous losses," another official said.

And, now that rates are again inching towards USD 84, oil company margins are under pressure. "They will have to adjust this against the higher margins they made last month," he said.

Though the government has deregulated petrol and diesel prices, rate changes have been in the past put on hold by public sector oil companies Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) for reasons that appear to be non-commercial.

There was a 19-day price freeze on petrol and diesel ahead of Karnataka polls in May 2018, despite international fuel prices going up by nearly USD 5 per barrel. However, no sooner were the elections over, they rapidly passed on to customers the desired increase over 16-straight days post-May 14, 2018, petrol price climbed by Rs 3.8 per litre and diesel by Rs 3.38 per litre.

Similarly, they had stopped revising fuel prices for almost 14 days ahead of the assembly elections in Gujarat in December 2017.

These companies had also imposed a freeze on petrol and diesel prices between January 16, 2017, and April 1, 2017, when assembly elections in five states Punjab, Goa, Uttarakhand, Uttar Pradesh and Manipur were held.

During the 2019 general elections, they moderated the revision by not passing on all of the desired increase in rates to consumers, industry sources said. The rates began to rise a day after the final phase of polling for the Lok Sabha elections ended.

The 82-day hiatus in rate revision in 2020 followed the government raising excise duty on petrol and diesel by Rs 3 per litre each to mop up gains arising from falling international rates. The government on May 6, 2020, again raised excise duties by Rs 10 per litre on petrol and Rs 13 per litre on diesel.

Oil companies, instead of passing on the excise hike to consumers, decided to adjust them against the reduction required because of the drop in international oil prices. They used the same tool and did not pass on the Re 1 per litre hike required for switching over to ultra-clean BS-VI grade fuel from April 1.