Hindustan petroleum Corporation (HPCL) chairman and managing director M K Surana said on Wednesday that the country needs to review taxation in order to bring down rising retail fuel prices.
Petrol and diesel prices touched new highs of Rs 77.17 per litre and Rs 68.34 per litre respectively in Delhi on Wednesday. On the other hand, Mumbai prices were the country’s highest, at Rs 84.99 per litre for petrol and Rs 72.76 for diesel. When asked about the rising prices, Surana said, “There is a need to review the taxation structure. The long-term solution before the country is to bring all petroleum products under the Goods and Services Tax (GST).”
Brent crude was ruling at $79.19 a barrel at one point today, while the Indian basket crude oil prices was seen at $78.10 a barrel. Surana added that there is no immediate trigger to bring down international prices in the near future. “We will be happy to have it around $60-70 a barrel. Today, we are able to partly take care of the sudden spikes in international markets as we take a 15-day average to determine Indian prices,” he added.
On Tuesday, BJP president Amit Shah hinted at a possible change in the formula of determining the pricing of petroleum products. Shah added that petroleum minister Dharmendra Pradhan is likely to hold a meeting with the oil marketing companies to come up with a strategy to bring down prices. Asked whether benchmarking to international prices needs to be relooked at, Surana said, "Earlier we were following a cost-plus model. In my opinion, benchmarking brings efficiency. After it replaced the earlier cost-plus model there has been a lot of improvement in things life energy efficiency and gross refining margins of companies.”
According to industry sources, every $1 rise in crude price demands an increase of around 63 paise per litre in the prices of both diesel and petrol. On the other hand, a one-rupee depreciation against the dollar on exchange rate requires a 50 paise increase in the prices of both the fuel. “The reason for the recent spike in prices was because of a series of reasons including OPEC production cut and geopolitical situations in countries like Venezuela, Libya, Nigeria and Iran. However, on product side, the demand has increased compared to last year,” he added.
On Tuesday, Moody's Investors Service expressed fear that fuel subsidy is set to increase with the risk of government asking upstream companies like Oil and Natural Gas Corporation Ltd and Oil India Ltd to share the burden.