Hopes quashed! 60 paise drop in petrol price was technical glitch; price cut by just 1 paisa

After a constant hike for 16 days, petrol and diesel prices cut by 1 paisa on Wednesday. Fuel prices have seen a sharp rise soon after the polling concluded in Karnataka assembly elections. The price of petrol has shot up by Rs 3.79 per litre and that of diesel by Rs 3.37 after the oil marketing companies ended their 19-day price freeze in the run up to Karnataka polls.

On May 30, the price of petrol in the national capital was at Rs 78.42 and the diesel was retailing at Rs 69.30. In the financial hub of Mumbai the prices of petrol and diesel were at Rs 86.23 and Rs 73.78, respectively. Earlier in a faux pas, the Indian Oil Corporation website showed the price of petrol in Delhi down by 60 paisa to Rs 77.83 and diesel by 56 paisa to Rs 68.75. 

The international crude prices were down on Tuesday after Saudi Arabia and Russia said that they were ready to ease supply curbs that have pushed crude prices to their highest since 2014. Last year, the organization of the Petroleum Exporting Countries and Russia decided to cut the supply to tighten the market and prop up the prices after they (prices) had fallen to their lowest in more than a decade.

India sources about 86 per cent of crude oil, 75 per cent of natural gas and 95 per cent of LPG from OPEC member countries. In all, India imports 80 per cent of its crude oil requirement and any increase in prices in the global market leads to an increase in the price of petrol, diesel and LPG.

The public anger was rising over incessant price hike for over 15 days. The opposition parties and the farmers have threatened the government of protest if it does not cut the excise duty or bring the petroleum products under the GST. Currently, the Centre levies Rs 19.48 excise duty on petrol and Rs 15.33 on diesel. The government will lose Rs 10,725 crore revenue for every Rs 1 cut in central excise duty.

India has the highest retail prices of petrol and diesel among South Asian nations as taxes account for half of the pump rates.

The government has so far not taken any call on excise duty but mulling to impose a windfall tax on oil producers like ONGC as part of a permanent solution to rising prices of petrol and diesel. Once the policy is in force, the oil producers, who get paid international rates for the oil they produce from domestic fields, would have to part with any revenue they earn from prices crossing USD 70 per barrel mark. And the revenues collected from this would be used to pay fuel retailers so that they absorb spikes beyond the threshold levels.

According to the finance ministry's revenue collection estimates, the central government expects to collect more than Rs 2.579 lakh crore by levying taxes on the petroleum products by the end of this fiscal. This is a massive jump from the gross revenue collection of around Rs 88,600 crore in 2013/14, in the last fiscal the collection was Rs 2.016 lakh crore.