Fuel rates were hiked for the 38th time in 68 days with petrol prices rising by 35 and diesel by 26 paise per litre on Saturday despite international benchmark Brent crude prices falling by $1.61 a barrel or 2.06% at the Friday close, compared to its peak of $77.16 on Monday.
The latest revision of India's domestic fuel rates have made petrol costlier by ₹10.51 per litre and diesel by ₹9.15 a litre since May 4, a day after results of five assembly polls were declared. Petrol is now priced at ₹100.91 per litre and diesel at 89.88 a litre in New Delhi.
While fuel rates of state-run Indian Oil Corporation (IOC) in Delhi are the benchmark for the entire country, retail prices of the two fuels differ from place to place because of variations in state taxes and local levies. Petrol prices have already crossed ₹100 per litre in five metros – Delhi, Mumbai, Chennai, Kolkata and Bangalore.
The cost of one litre petrol in Mumbai is now ₹106.93 and diesel ₹97.46. The highest fuel rates have been recorded in Rajasthan's Ganganagar where pumps are selling petrol at ₹112.24 per litre and diesel at ₹103.15 a litre.
Surging international oil rates and exorbitant domestic tax structure are two key reasons for high fuel rates at pumps. Domestic retailers align pump prices of petrol and diesel with their respective international benchmarks of the previous day, which often move in tandem with crude oil rates.
International oil prices have shown extreme volatility this week. While an inconclusive meeting of producers' cartel -- the Organisation of the Petroleum Exporting Countries and its allies, including Russia (together known as OPEC+) – over restraining output on Monday pulled down crude prices initially, falling US inventories and indications of strong demand from China and India saw prices rising again in the last two days of the week.
Benchmark Brent that surged to $77.16 a barrel on the first day of this week, highest since October 2018, fell over 4.8% in the next two sessions. It, however, gained 0.94% or 69 cents on Thursday and rallied 1.93% further on Friday to close the week at $75.55 per barrel, still lower than the Monday high.
India imports more than 80% crude it processes, hence international oil prices impact pump rates of auto fuels. High domestic taxes are the other reason for high rates of petrol and diesel.
In Delhi, Central levies account for 33.29% of petrol's price and state taxes, 23.07%, according to an official data of July 1. On diesel, Central taxes are over 35.66% while state taxes are about 14.62%. Through 2020, as global crude prices fell, the Central government and the states raised excise duty on the fuel to shore up finances hit by the pandemic.
The unrelenting upward movement of fuel rates since May 4 has already seen petrol cross ₹100 mark in various cities across the country including Delhi, Mumbai, Ratnagiri, Parbhani, Aurangabad, Jaisalmer, Ganganagar, Banswara, Indore, Bhopal, Gwalior, Guntur, Kakinada, Chikmagalur, Shivamogga, Hyderabad, Leh, Imphal, Kalahandi, Sopore, Baramulla, Patna, Salem, Thiruvananthapuram, Mohali and Darjeeling.
Even as international oil prices saw volatility, since May 4, pump rates of auto fuels in India moved only in the upward direction. For instance, despite Brent crude plunging to $65.11 on May 20, the lowest in these 46 days; petrol and diesel rates in the country went up the next day by 19 paise and 29 paise a litre, respectively.
According to executives working in state-run oil marketing companies, pump prices are also high because companies were recovering their past revenue losses like the one suffered for 66 days since February 27 when rates were not raised because of assembly elections in four states and one Union territory.
During the 66-day pause on rate hike, state-run retailers had also reduced politically sensitive petrol and diesel rates by 77 paise and 74 paise a litre, respectively in four small steps. But, the entire gains to the consumers were quickly reversed in the first four consecutive rounds of rate hikes starting from May 4.
The government deregulated the pricing of petrol on June 26, 2010 and diesel on October 19, 2014. Accordingly, state-run retailers are free to change pump prices every day. Public sector retailers — IOC, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL)— control almost 90% of the domestic fuel retail market.