Petrol and diesel prices were cut for the first time in 2021 following a steep decline in global crude oil prices. State-owned oil marketing companies (OMCs) on Wednesday, March 24, slashed fuel prices by 18 paise (petrol), and 17 paise (diesel) respectively.
Speculations were rife that the OMCs may curtail rates soon owing to a steep dip in global crude oil rates in the wake of rising coronavirus cases and the reimposition of lockdown in some nations.
Following Wednesday's cut, the price of a litre of petrol in Delhi now costs Rs 90.99, down from 91.17. Petrol prices have also declined in other major cities comprising Bengaluru (Rs 94.04), Chennai (Rs 92.95), Jaipur (Rs 97.56), Hyderabad (Rs 94.61), Kolkata (Rs 91.18), Mumbai (Rs 97.40).
Meanwhile, diesel price in Delhi has now dipped to Rs 81.30, down 17 paise from Tuesday, March 23. The fuel's rate has also come down in other major cities comprising Bengaluru (Rs 86.21), Chennai (Rs 86.29), Hyderabad (Rs 88.67), Jaipur (Rs 89.84), Kolkata (Rs 84.18), Mumbai (Rs 88.42), Bengaluru (Rs 86.21).
Although Wednesday's drop may not provide enough relief to citizens, the fact that OMCs slashed fuel rates following a dip in global oil prices is a positive development. It is a portent that if global oil prices dip further, the OMCs are expected to pass on the benefit to customers.
Nevertheless, the rationale behind India's exorbitant petrol and diesel prices is the high fuel tax imposed by the Centre and state governments.
Taxes levied by the Centre and states constitute more than half of petrol and diesel prices, accounting for 60 per cent of the retail cost of the former and 54 per cent of the latter.
India imports 80 per cent of crude oil and is third in terms of consumption. In FY19 and FY20, the Centre spent $111.9 billion and $101.4 billion, respectively, on crude oil imports, according to Petroleum Planning & Analysis Cell (PPAC) data.
Taxes on petrol and diesel are an essential revenue source for both the Centre and state governments. After the coronavirus pandemic and subsequent lockdown, generating revenue became even more important for states.