Brace For Impact: Elections Over, Petrol/Diesel Price Can Sharply Increase Now (But How Much?)

Brace For Impact: Elections Over, Petrol/Diesel Price Can Sharply Increase Now (But How Much?)
Brace For Impact: Elections Over, Petrol/Diesel Price Can Sharply Increase Now (But How Much?)

After remaining stable for almost two months thanks to the assembly elections in four states and one Union territory, now Petrol and diesel prices are expected to get small increments by the end of the month.

Why Would This Happen?

So far, the state-run fuel retailers are losing about Rs 3 a litre on the sale of the fuel.

This is caused by the higher international oil rates along with the depreciation of the rupee against the dollar, according to the sources.

Basically, both international oil prices and exchange rates affect the import of crude oil. 

About a month ago, the average exchange rate for purchasing crude oil was Rs 72.29 as compared to Rs 74.77 now. 

Similarly, the average price of crude oil has jumped by over $5 a barrel. 

Sources said that altogether, this difference translates into a ?3-plus per litre increase in petrol and diesel prices. 

It is noteworthy here that our country imports more than 80% of crude oil it processes and pays in dollars.

How Does This Affect The Oil Companies?

Currently, “ the Public sector OMCs [oil marketing companies] are bleeding as they are unable to raise fuel rates because of political reasons. But, they will take a commercial call soon after April 29,” according to sources involved in setting the price of fuels. 

Since February 27, the prices of petrol and diesel have been reduced marginally (four times) which was a day after the Election Commission announced assembly polls.

So far, the central and state levies account for the chunk of the retail price of fuel.

For instance, in Delhi, the central levies account for over 36% of petrol’s retail price, and state levies 23%.

Although, it is unlikely that those will be reduced considering the parlous state of the economy, that too in the midst of the raging second wave of Covid-19

Last year, the Centre’s move to raise excise even as global oil prices crashed has definitely helped in boosting the government’s revenues.

Government’s Control On Prices

In reality, all the oil companies are officially free to align petrol and diesel rates every day in lines with international oil markets. 

But as we know that the government manages pump prices of the two fuels through state-run retailers like Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL).

They seem to control over 90% of the domestic fuel retail market. So far IOC, BPCL and HPCL have not commented on the subject.

But it seems that the fuel price hike is imminent next month.

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