Petrol price was on Tuesday cut by 15 paise in all metro cities. Today's petrol price in Delhi is Rs 76.43 - Rs 2 down from its all time high of Rs 78.43 on May 29. In other metro cities, the price of petrol is Rs 79.10 in Kolkata; Rs 84.26 in Mumbai and Rs 79.33 in Chennai. However, the diesel price was cut by only 10 paise. It is availble at Rs 67.85 in the national capital; Rs 70.40 in Kolkata; Rs 72.40 in Mumbai and Rs 71.62 in Chennai.
This is the fourteenth cut in a row. Before slashing the fuel prices, the petroleum companies had hiked the cost for 16 consecutive days - from May 13 to May 29, petrol price was raised by Rs 3.8 and diesel by Rs 3.38 per litre.
Indian petroleum prices are determined by the cost of crude oil in international market. Last year, crude oil prices shot up after the organisation of oil exporting countries decided to cut the excessive supply, which had brought down the prices to the lowest in more than a decade. The countries slashed the overall fuel output by about 1.8 million barrels per day that created the shortage of crude which in turn spiralled the prices.
However, the members from OPEC countries -- Saudi Arabia, the United Arab Emirates, Kuwait and Algeria -- earlier this week met unofficially in Kuwait and agreed to lift the curb on crude supply. Following the report, the US crude prices touched its lowest level in nearly two months.
While international factors do play a role in price determination in India, but it will be wrong to suggest that the current fuel prices here in the country which is highest in South Asia is solely because of crude cost. The Indian governments - state and centre - have lot to do with current prices of petrol and diesel. Currently, the central government levies Rs 19 excise duty on petrol. The states, too, have their share of tax in the form of VAT. If added together, the taxes on petroleum products work out to be around 50 per cent of the dealer cost.
Industry body Assocham last week suggested that reducing taxes is the best solution to check the spike in fuel prices which will also help India on the exports front. In a statement, Assocham Secretary General D S Rawat said that cutting down taxes will make India's exports competitive, bring down current account deficit and the country may also no longer see the rupee depreciating.
Not only Assocham, but opposition parties too demanded for tax cut to provide some relief to the consumers. However, the market analysts believe that the Centre does not have enough space to cut excise duty as one rupee cut will result in Rs 13,000 crore loss for the government annually.
Despite the price hike, India's domestic sales for diesel and petrol rose to record highs in May. According to a data from the Petroleum Planning and Analysis Cell, petrol consumption in May climbed to 2.46 million tonnes and diesel sales soared to 7.55 million tonnes - the highest monthly sales figures in PPAC data going back to April 1998.
Reuters reported today that India used 35.2 million tonnes of diesel during January to May this year, up 6 per cent from the corresponding period last year.