New Delhi: Retail diesel price in India rose sharply to a record high on Wednesday on the back of steadily firming global oil prices, raising the threat of worsening trade deficit and increasing the government’s subsidy outgo on liquified petroleum gas (LPG) for households.
On Wednesday, diesel price touched Rs59.38 a litre in Delhi, a record high based on official data available from the year 2002 with the state-owned Indian Oil Corporation.
Petrol price inched up to Rs69.72 a litre in Delhi on Wednesday, a level previously seen in November. Both commodities are priced freely, allowing retailers to pass on any increase in their price to consumers.
In International markets, crude oil price retreated marginally from a two-and-a-half-year high of $67 scaled on Tuesday. That level was last seen in May 2015. Retail prices of petrol and diesel in India track global prices of these auto fuels, not crude, although they are broadly linked to crude oil price trends, with some deviations related to the demand-supply situation.
The government’s cooking gas subsidy outgo, which was around Rs300 per cylinder in March, and softened to less than Rs100 subsequently on account of both easier fuel price and a favourable exchange rate, has since moved up to Rs251 in the monthly pricing period starting December, according to the Petroleum Planning and Analysis Cell (PPAC), an arm of the oil ministry.
The impact of rising LPG subsidy on the exchequer, however, may be cushioned by reduced consumption of subsidized kerosene on account of a drive to improve consumption of the cleaner LPG and improvement in village electrification. In the first half of the current fiscal, the LPG subsidy given to consumers touched Rs7,500 crore, compared with Rs12,133 crore given in the entire FY2017, according to PPAC.
Oil is heading for a second yearly advance as the Organization of Petroleum Exporting Countries (Opec) and its allies including Russia prolong supply curbs through the end of 2018, reported news agency Bloomberg. According to data available with the commerce ministry, oil imports during April-October period of FY2018 were valued at $56.25 billion, an increase of 20.2% from what was reported in the same time a year ago. India’s merchandise trade deficit was $14 billion in October FY2018.
“The current spike in global oil price is on account of temporary supply disruptions. Although oil price could inch up to $70 a barrel in the near term, it could subsequently settle at $60-65 levels as US producers ramp up production,” said K. Ravichandran, senior vice-president, group head-corporate ratings, Icra.