Soon, petrol and diesel may cost less as Brent sinks to 11-year lows

With international prices of crude oil plummeting to an 11-year low, prices of petrol, diesel and jet fuel are likely to come down further in the domestic market.

The price of the Indian basket of crude oil imports have currently fallen to the $33-$34 per barrel range, which is expected to bring down the average price for the current fortnight below $39 per barrel, which was recorded for the previous fortnight.

Public sector oil companies revise prices of petrol and diesel every fortnight based on the average price of the previous fortnight and the exchange rate of the rupee compared to the dollar. As much as 72 per cent of the Indian basket of crude comprises sour crudes of the Oman and Dubai varieties while the remaining 28 per cent is of highquality Brent variety. Indian refineries go in for a mix of these crudes in order to cut costs.

Brent crude prices on Monday fell another two per cent to $36.04 per barrel, a level that was prevailing in 2004. This is even lower than the prices recorded during the global financial crisis of 2008-09, when demand had slumped creating an oil glut in the market. The price of oil has halved over the past year.

An India Oil official said that crude production is running close to record highs and with supplies entering the market from countries such as Iran, the US and Libya, the price is set for sharp decline going ahead. Brent crude futures have fallen more than 18.5 per cent this month, their steepest fall since the global financial meltdown.

Public sector oil companies had in their fortnightly revision on December 15 reduced the price of petrol by 50 paise a litre to Rs 59.98 per litre and that of diesel by 46 paise to Rs 46.09 a litre as the cost of crude in the international market had come down. Industry officials said that oil companies did not pass on the entire decline in prices to consumers in order to keep a cushion for the government to raise excise duty.

The government is keen to meet the fiscal deficit target and higher excise duty will help it to meet the extra outgo on one-rank-one pay.

Collections from corporate taxes have also slowed and with stock markets turning volatile, the disinvestment target is not expected to be met. "Excise duties on petroleum products are lowhanging fruit that the government would not like to let go as it is determined to meet the fiscal deficit target," a senior official pointed out.

Excise duty was last raised on November 7 by Rs 1.60 per litre on petrol. On diesel, excise duty was hiked by 40 paise. The increased duties on the two fuels is expected to yield an additional revenue of about Rs 3,200 crore during the rest of this fiscal. The government had collected Rs 99,184 crore in excise collections from the petroleum sector in 2014-15. During the first quarter of this fiscal, the figure worked out to Rs 33,042 crore.

(In association with Mail Today Bureau)