State-run oil marketing companies have slashed petrol prices by 91 paise per litre from Monday and diesel prices by 84 paise. This is the seventh consecutive reduction in petrol prices in the last four months and the third cut in diesel prices since October 18 when the Cabinet deregulated the fuel.
But the decision drew criticism from the opposition parties and petrol pump dealers, who said the government was not passing on the entire benefit of falling global oil prices to the consumers.
International crude prices have dropped 40% since June to $70 a barrel on Friday, but the reduction in pump prices of petrol and diesel are not in that proportion, they said. Petrol prices have been reduced by a little over 11% and diesel by 8% since June.
Brent crude fell to a new four year low on Friday after the Organisation of Petroleum Exporting Countries (OPEC) decided not to cut output despite a slide in prices.
India's average crude oil import price (Indian basket) plunged to a four-year low of $72.51 per barrel last week, according to an oil ministry statement issued on Friday.
Executives at state-run oil firms, however, said that in a bear market, the global price of refined products falls after a lag. Retail prices of petrol and diesel are also affected because of the rupee-dollar exchange rates, they said. India imports about 80% crude oil it processes and pays in dollar.
Oil companies have so far reduced petrol prices by Rs 10.27 per litre since August 1 and diesel by Rs 6.46 per litre since October 18. They had last cut fuel prices on November 1.
"Since the last revision, international prices of both petrol and diesel have continued to be on a downtrend.
The rupee-dollar exchange rate has, however, appreciated since the last price change. The combined impact of both these factors warrant a decrease in retail selling prices of both petrol and diesel," an IOC spokesman said.
Taking advantage of falling international oil prices since June, the government had on November 13 imposed additional excise duty ofRs 1.50 per litre on petrol and diesel to meet its revenue deficit target.
Although the government officially deregulated diesel in October, just as it did in case of petrol over four years ago, the oil ministry retains informal control on retail prices.
The government has informally nudged state-run firms to keep a small margin on fuel prices to prevent consumers from volatile global oil markets especially during the crucial elections in Jharkhand and Jammu & Kashmir, government and industry officials said.
"Despite a hike in central excise on petrol and diesel in mid-November, there was a scope to reduce fuel prices by 50 paise to Rs 1 per litre on November 15. But oil companies silently usurped the amount. Private retailers are silent partners of public sector oil firms in this because they have historically suffered from predatory pricing and this is the time to make up some of their past losses," said one dealer, requesting anonymity.
Source: ET
