Crude oil rates plunge 10%. Will it bring relief for petrol and diesel prices?
Petrol and diesel prices have room to be reduced in India as the international crude oil prices have slumped by 10% in the last fortnight. The crude oil rates have declined from $71 per barrel to $64 a barrel earlier this month, as the demand recovery prospects have decreased. Also, as the European cities are imposing restrictions on mobility due to the rising Covid-19 cases, the demand for fuel is slumping, resulting in the crude price drop.
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Currently, the petrol and diesel prices are steady for 24 days in a row, since the assembly elections in four states and one union territory have been announced by the Election Commission. However, that is not bringing much relief, as the costs for both the motor fuels are already sky-high. However, with the recent drop in crude rates, the oil marketing companies have room to pass on the benefit to the consumers by reducing the price of motor fuels.
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Such record high prices have affected the demand for motor fuels in February this year. The demand for diesel, which makes up to around 40% of the country’s oil demand, contracted by 8.5%. On the other hand, petrol sales too declined by 6.5%.
Petrol and diesel prices on Tuesday are ₹97.57 per litre and ₹88.60 per litre, respectively in Mumbai. In Delhi, the prices of per litre petrol and diesel are ₹91.17 and ₹81.47 respectively. The last price revision was announced on February 27 for both motor fuels.
Since the beginning of February 2021, after the Union Budget, the oil marketing companies have hiked fuel prices 14 times raising the prices of per litre petrol and diesel by ₹4.22 and by ₹4.34 respectively in the national capital. Both the petrol and diesel prices were revised upward a total of 26 times in 2021. While petrol price has witnessed a hike of ₹7.46 per litre, diesel cost increased ₹7.60 per litre so far in 2021, adding a burden to the consumers.
At some points, petrol price crossed ₹100 mark in several cities of Rajasthan, Madhya Pradesh and Maharashtra.
The motor fuel bill comprises both state and central government taxes along with dealer commission. Both the state and central government taxes contribute to around 60% of the pump prices of petrol and diesel. While some of the state governments have announced marginal cuts in their share of taxes to give some relief to the consumers, the central government is yet to announce any such move. In fact, the central government has refused to bring down tax for fuels.
There have been strong demands from various stakeholders to bring petrol and diesel under the GST ambit, which would reduce the price variety across the country and bring uniformity. However, any such move is due from both the centre and state governments as well.