After touching a four-year high on February 6, petrol and diesel prices tumbled down by 37 paise and 60 paise in the past five days - and by 21 paise and 28 paise on Monday alone - as benchmark Brent crude oil price dropped by 63 cents on $63.42 per barrel. Due to an increase in output in the US, crude oil price settled at $59.83 per barrel in the US West Texas Intermediate (WTI).
On Monday, the petrol price in Delhi was Rs 73.01 per litre; Kolkata Rs 75.70; Mumbai Rs 80.87; and Chennai Rs 75.73. In the NCR, it was little higher than the national capital with Rs 73.77 in Faridabad; Rs 73.54 in Gurgram; Rs 74.6 in Noida; and Rs 74.49 in Ghaziabad. The Diesel price in metro cities was Rs 63.62 per litre in Delhi; Rs 66.29 in Kolkata; Rs 67.75 in Mumbai; and Rs 67.09 in Chennai. The diesel price was Rs 64.70 in Faridabad; Rs 64.48 in Gurugram; Rs 64.01 in Noida; and Rs 63.90 in Ghaziabad.
Major factors behind a sharp increase in crude oil price are speculation about the OPEC (Organisation of the Petroleum Exporting Countries) and non-member countries' plan to reduce production and higher output in the US.
The RBI's Monetary Policy Committee on February 7 said domestic pump prices of petrol and diesel rose sharply in January, reflecting lagged pass-through of the past increases in international crude oil prices. The RBI also said oil prices have moved both ways in the recent period and could potentially soften from current inflation levels based on production response.
On February 1, Finance Minister Arun Jaitley cut basic excise duty on petrol and diesel by Rs 2 and additionally abolished another Rs 6 excise duty on fuel. However, the minister then announced a new road cess of Rs 8 per litre, leading to no change in the petrol prices. Analysts suggest another excise cut would have put an additional burden on the fiscal deficit target, which the government couldn't afford considering the Lok Sabha elections scheduled for 2019. FM Jaitley on February 10 tried to settle fears around the rising oil prices, saying there's no need to worry about "fiscal slippage" due to unpredictable trend in crude oil price. Highlighting a decline in fuel prices in the past days, he said an assessment should not be made based on hypothetical situation.
There's been sharp rise in fuel price since October 2017. Though the government introduced Rs 2 per litre excise duty cut then, a production cut by major global oil producer countries led to a reversal in the trend.
Last week, Petroleum Minister Dharmendra Pradhan said in Parliament that though the centre reduced the excise duty on petrol and diesel by Rs 2 on October 3 last year, just four states and a Union Territory cut local sales tax or VAT on petrol and diesel even after the government requested all the states to do so, the minister said.
The states that reduced VAT following the October 3, 2017, cut in excise duty were Maharashtra, Gujarat, Madhya Pradesh and Himachal Pradesh. The BJP-led NDA government has reduced the excise duty only once in over four years of its rule, while it increased the same on nine occasions to take away the benefits of sliding international oil prices between late 2014 and January 2016.