Petrol, diesel price hikes nearing global crude oil levels; excise relief discussed, no decision yet

Retail fuel prices, i.e the costs of petrol and diesel, are nearing global crude oil levels and sustained hikes may not be needed if crude stabilises, sources said on Tuesday.

Retail pass-through is close to $95 per barrel of crude oil while petrol and diesel cost Rs 105.41 and Rs 96.67 a litre, respectively.

Sources noted that sustained hikes may not be required if crude stabilises at current levels. Around a month more of losses may still be recoverable by oil marketing companies (OMCs), they said.

Petrol and diesel prices were last hiked on April 6, taking the total increase in rates in 16 days to Rs 10 per litre or over 10 percent. This was the 14th increase in prices since the ending of a four-and-half-month long hiatus in rate revision on March 22.

Rates have been increased across the country and vary from state to state depending upon the incidence of local taxation.

The rate hike comes as OMCs made gains till January-end that balanced out in February end following which the firms clocked losses from March, according to sources.

They said discussions were held on excise duty relief, however, no decision has been taken yet. According to them, a Rs 5 per litre cut on excise duty on petrol and diesel would amount to Rs 70,000 crore revenue loss at this stage.

Sources earlier told CNBC-TV18 that a gradual increase in fuel prices will continue as the government is looking at a slow pass-through of oil price shocks instead of a one-time steep hike.

The government doesn’t want to shock the economy on fuel prices, they said as OMCs look to pare losses from the sharp rise in oil prices amid supply concerns due to Russia-Ukraine war.

Meanwhile, oil prices climbed globally as fears of a demand downturn in China eased after Shanghai relaxed some COVID-19 related restrictions, and OPEC warned it would be impossible to increase output enough to offset lost Russian supply.

Brent crude futures were up $1.72, or 1.75 percent to $100.20 a barrel and US West Texas Intermediate contracts were up $1.76, or 1.87% to $96.05 a barrel at 9:35 am.