New Delhi: After 16 days of relentless price hikes, petrol price was today cut by about 60 paise a litre and diesel by 56 paise on the back of softening international oil rates and strengthening Indian rupee.
The reduction comes after 16 consecutive price increases since 14 May when fuel retailers ended a 19-day pre-Karnataka poll hiatus to pass on a spike in global oil rates.
Oil prices fell to about $75 a barrel as Saudi Arabia and Russia said they were ready to ease supply curbs that have pushed crude prices to their highest since 2014.
The sharp fall in global crude oil rates over the last couple of days may come as a breather for India’s Narendra Modi government which had run into tricky political waters over rocketing fuel prices. In all, petrol price was increased by Rs 3.8 per litre and diesel by Rs 3.38 in the last fortnight.
The world’s three largest oil producers—Saudi Arabia, Russia, and the US—have increased supply, leading to a near 5% crash in the global benchmark Brent crude since Friday.
Earlier, the world’s major oil-exporting nations had cut back production, leading to the surge in oil prices since the start of the year.
The government refused to cut excise duties as every rupee cut in excise duty on petrol and diesel could have resulted in a revenue loss of almost Rs 11,000 crore.
The central government levies Rs 19.48 a litre of excise duty on petrol and Rs 15.33 per litre on diesel. State sales tax or VAT vary from state to state. In Delhi, VAT on petrol is Rs 15.84 and Rs 9.68 a litre on diesel.
The government had raised excise duty nine times between November 2014 and January 2016 to shore up its finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre.
Subsequent to that excise duty reduction, the Centre had asked states to also lower VAT, but just four of them – Maharashtra, Gujarat, Madhya Pradesh and Himachal Pradesh – reduced rates while others including BJP-ruled ones ignored the call.
In all, duty on petrol rate was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months that helped government’s excise mop up more than double to Rs 2,42,000 crore in 2016-17 from Rs 99,000 crore in 2014-15.
India has the highest retail prices of petrol and diesel among South Asian nations as taxes account for half of the pump rates.