The government on Tuesday told Parliament that it will make calibrated interventions to keep auto fuel prices under check. “The government is keeping a close watch on these factors and the evolving geo-political developments, and would make calibrated interventions as and when required to safeguard the interests of the common man,” Pankaj Chaudhary, minister of state for finance, told the Rajya Sabha. Auto fuel prices, though formally deregulated, have not seen any change since November 4, 2021.
The Indian basket of crude rose from around $83 per barrel in early November to a peak of $128/barrel on March 9, but came down to 110/barrel on Monday. At present, the Centre’s taxes on petrol and diesel are Rs 27.9/litre and Rs 21.8/litre respectively. Of this, special additional excise duty is Rs 11/litre and Rs 8/litre on petrol and diesel, respectively. The prices have been put on hold in the context of the assembly elections to five states that concluded on March 7.
Oil prices have tumbled this week, taking some pressure off the inflation sweeping the globe, with a barrel of Brent crude falling below $100 per barrel on Monday after touching $140 last week.
With hardening of commodity prices after Ukraine-Russia conflict, India’s wholesale price inflation (WPI) reversed it trajectory in February 2022 and increased to 13.11% after coming in at 12.96% in January. Retail inflation in February also rose marginally to 6.07% from 6.01% in the previous month, hovering over the upper bound of the RBI’s inflation target range of 2%-6%.
The weight of “crude petroleum and natural gas” and “fuel & power” subgroup (which includes petrol and diesel) in WPI is13.15% and 2.41% in CPI. The changes in global crude oil prices have a direct as well as indirect impact on the different components of the WPI and CPI.
It is a hard choice for the government to either cut the excise duty on diesel and petrol and forgo huge amounts in tax revenue or let the oil marketing companies hike retail prices of auto fuels. It could also opt for a judicious combination of the two steps.
The public sector oil marketing companies (OMCs) take decisions on pricing of petrol and diesel in line with their international product prices, exchange rate, tax structure, inland freight and other cost elements, Chaudhary said in a written reply.
