Denying any move to interfere with the pricing of auto fuel which has been left to state-owned refiners, oil minister Dharmendra Pradhan on Wednesday said the increase in prices of petrol and diesel was on account of hurricanes ‘Harvey’ and ‘Irma’ that hit the US in recent weeks.
Prices of fuel is linked to their international prices, and are not based on cost of production, which makes them fluctuate as per global trends. The government introduced a daily price revision system from 16 June, replacing the previous system of fortnightly price revision.
Pradhan said that the hurricanes hitting the US led to about 13% of US refining capacity not being available leading to an increase in prices of fuel in world markets. The minister remained non-committal on cutting taxes but said that prices are likely to ease in coming weeks as per some forecasts.
Daily price revision is a double-edged sword in the sense that any short-lived sharp spike in global price could immediately hit the domestic consumer and also break down the pain of a sustained increase in global fuel prices.
The minister said that the daily revision also immediately passes on the benefit of any reduction in international oil prices to consumers.
“The government has no business to interfere in day-to-day operations of oil companies,” Pradhan said after meeting heads of state-run firms in New Delhi.
When asked if the government will cut excise duty to soften the blow, he said: “That is a call the finance ministry has to take but one thing is very clear—we have to balance the developmental needs with consumer aspirations.”
“We have to finance plans for developing highways and roads, modernizing railways, and improving rural sanitation, primary healthcare and education,” the minister said.
Some state governments have drastically increased value-added tax on fuel. “It is high time the GST (goods and services tax) Council should consider bringing petroleum products in the ambit of GST,” the minister said
.