If not for a 20-day pause in the revision of fuel prices, you would be paying more than Rs 103 per litre in Mumbai now or about Rs 100 in any of the other cities of the country. But do not think that the extra money that the country paid exporters of crude oil came to you for free. Your tax went into the temporary subsidy, of course. However, the state-run oil companies did not get your money forthwith. They are suffering an under-recovery of Rs 4 on a litre of petrol and Rs 2 on diesel, sources in some of these companies said.
The retailers stopped revising prices on 27 February. This was a day after the Election Commission announced the dates of assembly polls in five states. Since then, India’s crude cost has risen further from $ 64.68 a barrel on 26 February to $ 66.82 on 167 March. One of these days, it was $ 68.42 a barrel.
Not only that, the rupee lost strength during this period to rule at 72.57 against the dollar on 17 March.
“Oil companies consider a 15-day rolling average for pricing crude. The average is still high for refiners. Benchmark Brent has been ruling high and has shown signs of marginal cooling in the last few days. The Indian Basket follows Brent and has softened a bit since Wednesday. But as of now, retailers are losing Rs 4 and Rs 2 on petrol and diesel, respectively. There is under-recovery in LPG also,” a senior official said.
The price of regular petrol shot past Rs 100 a litre for the first time in India in Sri Ganganagar and some other towns of Rajasthan on 17 February.
Subsequently, several other cities in states with high VAT too saw the price hit a century. Prices in other states are ruling well above Rs 90 a litre. Household cooking gas has gone up cumulatively by Rs 175 since December.
The sharp rise in fuel prices has prompted widespread clamour for a tax cut by the Centre, which had raised excise duty sharply last year. The opposition parties, especially in poll-bound states, too are using the issue to attack the Centre.
The current freeze on price revision is reminiscent of 2018 when state-run fuel retailers were informally ‘nudged’ by the Centre to hold prices steady for 19 days from 24 April to 13 May ahead of the Karnataka assembly election.
Officially, the has government blamed output cuts by producing countries for high fuel prices and described it as a “temporary” phase. According to ICRA vice-president Prashant Vasisht, the freeze will adversely impact the “profitability and cash accruals” of oil companies, leading to “higher reliance on debt, which might strain their credit metrics.”