Flagging concern over increasing fuel prices, the Government has decided to work on an appropriate solution soon, according to top officials in the Oil Ministry.
More than a week after the State-owned oil firms ended a 19-day pre-Karnataka poll hiatus on revising fuel prices, petrol and diesel rates have skyrocketed. Currently, petrol prices are at Rs 76.87 per litre in Delhi, Rs 79.53 per litre in Kolkata, Rs 84.7 per litre in Mumbai and Rs 79.79 per litre in Chennai, according to IOC. Similarly, diesel prices are at Rs 68.08 per litre, Rs 70.63 per litre, Rs 72.48 per litre and Rs 71.87 per litre in three cities respectively. At Rs 79.53/litre in Kolkata, it’s a near-five year high.
In last nine days, petrol price has risen by Rs 2.24 a litre and diesel by Rs 2.15. While Oil Minister Dharmendra Pradhan has aired concerns about high oil prices, a senior official said the Government will come out with “some steps” this week to deal with record high petrol and diesel rates.
“I have loudly spoken about concerns about high oil prices,” said Pradhan, adding that appropriate steps will be taken but he did not elaborate in details.
Earlier in the day, Bharatiya Janata Party chief Amit Shah also assured that the Government will come up with a solution in three-four days to keep a check on increasing fuel prices in the country. “We are taking increase in fuel prices very seriously. Oil prices have increased according to a set formula. We are working on the situation at the highest level. Our people in the government will come up with a solution in three-four days,” Shah said.
While Indian Oil Corp (IOC) chairman Sanjiv Singh told reporters that there is no direction from the Government for moderating prices and the three-week hiatus before the Karnataka poll was to avoid sharp spike in retail rates. “We believed that fundamentals did not support such sharp spikes witnessed so we decided to moderate prices,” he said while briefing at a Press meet on the fourth quarter earnings.
Asked what changed their mind, he said fuel retailing runs on narrow margins and no company can continue to sell at below cost for long. The Government may not rely only on cutting excise duty, which makes up for a fourth of the retail selling price, said the official cited earlier, but he too did not elaborate on the various steps being considered.
“Rising fuel price is a crisis situation for Government and it has to be handled with combination of steps. Finance Ministry is consulting the petroleum ministry on rising crude prices,” he said.
Rates vary from State to State depending on the incidence of local sales tax or VAT. The prices in Delhi are the cheapest among all metros and most State capitals. The official said the Government has to be mindful of its fiscal maths while dealing with the option of cutting excise duty. “We cannot rely on excise duty cut alone, although I am not ruling out a possibility of cutting excise duty. We have to be mindful of any fiscal impact of any excise cut on fuel,” the official said.
Both the Centre and States, where VAT makes up for 20-35 per cent of the retail cost and have gained from the rising oil prices, need to take measures. “Some steps to deal with rising oil prices are likely to come this week,” he added.
“The rupee, which has fallen to 16-month low of 67.97 against the US dollar, is also playing a role in high oil bill,” he said.
IOC chairman said the companies have freedom to revive prices and they took a call in the best interest of consumers. The Central Government levies Rs 19.48 a litre of excise duty on petrol and Rs 15.33 per litre on diesel. State sales tax or VAT varies from state to state. Unlike excise duty, VAT is ad valorem and results in higher revenues for the state when rates move up.
In Delhi, VAT on petrol was Rs 15.84 a litre, and Rs 9.68 on diesel in April. On Tuesday, it is Rs 16.34 on petrol and Rs 10.02 a litre on diesel. Every rupee cut in excise duty on petrol and diesel will result in a revenue loss of Rs 13,000 crore.