Petrol price on Tuesday rose by 54 paise per litre to Rs 73 and diesel price by 58 paise per litre to Rs 71.17 in Delhi.

Petrol and diesel prices in India, which never fell in-line with the falling crude oil prices, may soon skyrocket to Rs 80-85 per litre by September-end as crude oil marches on recovery towards pre-coronavirus price levels. Petrol prices surged by Rs 1.74 per litre in a three-day straight hike in fuel prices. Petrol price on Tuesday rose by 54 paise per litre to Rs 73 and diesel price by 58 paise per litre to Rs 71.17 in Delhi. The surge in petrol and diesel prices may get steeper and the prices may further rise by Rs 5-6 per litre in a week as the effect of weak rupee couples with rising crude oil prices, Ajay Bansal, president of All India Petroleum Dealers Association, told Financial Express Online. 

Rupee-dollar exchange rate and international crude oil prices play a major role in determining retail fuel prices. While the rupee is trading over 75 against the dollar, the crude oil prices have significantly recovered to around $40 a barrel. Fuel prices may shoot up if the government doesn’t give relaxation in the excise duty, Ajay Bansal added. Centre takes benefit of excise, states absorb VAT and the brunt of high crude prices are solely borne by the consumers, he further said.

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With the sudden fall in crude oil prices, the government had increased the central excise duty of petrol and diesel twice in the last three months, giving negligible benefits to the consumers. Ajay Bansal also mentioned that the price of petrol and diesel could have reduced by Rs 30 per litre if the full benefit of falling crude prices were given to the consumers. Now with the recovery in oil prices, the price of petrol and diesel is not expected to fall, which shows how the government is relying on the recovery of fuel demand to fill its coffers, said a report by Care Ratings. The government has never passed on the full benefit of the soft crude prices to the consumers, the report added. 

Meanwhile, amid a major cut in production from all the leading oil-producing countries, and growing demand from China and the US as social distancing restrictions ease, oil prices rebounded on Tuesday. OPEC and allies have agreed to extend their production cut for an extra month.