Diesel, petrol hit new lifetime highs on the 7th straight day of fuel price hikes

NEW DELHI: Petrol and diesel prices have risen to record levels in the country following rocketing international fuel rates and a weaker rupee, piling pressure on the government to cut duties and bring relief to customers.

On Sunday, petrol was priced at Rs 76.24 per litre at Indian Oil pumps in Delhi, more than the previous all-time high price of Rs 76.06 reached in September 2013. Fuel prices vary from state to state according to local levies. Petrol was sold for Rs 84.07 per litre in Mumbai, Rs 79.13 in Chennai and Rs 78.91in Kolkata.

For the last few months, diesel prices have been scaling new peaks every few days. On Sunday, diesel was sold for Rs 67.57 per litre in Delhi, Rs 70.12 in Kolkata, Rs 71.94 in Mumbai and Rs 71.32 in Chennai. Prices of petrol and diesel have risen by Rs 13.15 and Rs 14.24 per litre, respectively, in Delhi since July 1 last year, a period during which international crude prices have risen two-thirds to about $80 a barrel.

A combination of healthy demand, production cuts by oil cartel led by Saudi Arabia and Russia, drop in output from Venezuela and US decision to impose sanctions on Iran has led to the recent surge in oil price.

State oil companies have the freedom to daily revise prices of petrol and diesel to reflect changes in international fuel rates and the exchange rate but halted revision for 19 days ahead of Karnataka voting even as international rates flared. Now they are trying to make up for that freeze. Since rate increases resumed on May 14, prices of petrol and diesel have gone up by Rs 1.61 and Rs 1.64 per litre, respectively.

Rising fuel prices stoke broader inflation, expand current account deficit, induce demand for subsidies and duty cuts and shrink room for interest rate cuts. The central government had cut excise duties on both petrol and diesel by Rs 2 per litre early October last year to limit the impact of sharp price rise then. But a continued surge in oil price quickly negated the effect of the duty cut.

Between November 2014 and January 2016 when crude prices were declining, the Centre had raised excise duty by Rs 11.77 per litre on petrol and Rs 13.47 on diesel. Now with prices zooming, there is a demand to roll back some of these duties.