In fact ruling politicians have only two things to say then questioned about the price rise in fuel. First, “it is due to international price hike of crude” and second, “we have nothing in our hands as it is deregulated”. Ultimately, the common consumers continue to bleed.
The world’s most-used crude benchmark, Brent was trading at $94.91 per barrel on Thursday after concerns of a global recession led to it slipping to a six-month low of $91.51 on the previous day.
The oil companies are supposed to revise and make changes whether to increase or decrease on the retail price of petrol and diesel daily morning in line with cost. But they froze rates for a record 137 days beginning November 4, 2021, just as states like Uttar Pradesh and Goa went to polls. This period the oil companies see as the “loss period” as international price of crude had gone up during this phase.
In fact, petrol was deregulated in June 2010 and diesel in November 2014. Since then, the government does not pay oil firms any subsidy to compensate them for losses they might incur on selling fuel at rates below cost. In a way, it is totally in oil companies hands when to take a call to change the petrol and diesel prices, except when the code of conduct comes into effect during election times.
Soon after the State elections were over and the ‘freeze’ ended on March 22 this year and rates went up by Rs 10 per litre each in just over a fortnight. The fall in international crude oil prices has meant that fuel retailers such as Indian Oil Corporation are now breaking even on petrol but there are some losses on diesel, officials with knowledge of the matter said. So, the oil companies recoup losses when input costs fall.
Also, the state-owned fuel retailers IOC, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) have not exercised their right to adjust the retail selling price of petrol and diesel in line with the international costs for four and half months now to help the government manage runaway inflation.
It is a fact that at one point of time, they were losing Rs 20-25 per litre on diesel and Rs 14-18 a litre on petrol as international oil prices soared. These losses have been trimmed with the fall in oil prices. “There are no under-recovery (losses) on petrol now. For diesel, it will take some time to reach that level,” an oil official was quoted in media. But this is unlikely to translate into an immediate reduction in rates as oil companies will be allowed to recoup losses they had accumulated on selling fuel at below cost in the last five months, another official said. Under-recovery on diesel is now down to Rs 4-5 a litre.
Also, oil companies did not revise rates to help the government manage inflation which had already peaked to a multi-year high. It would have further spiked if petrol and diesel prices were increased in line with cost. This also means that the government has influence over the oil companies but is not taking any measures to reduce the prices. Additional taxes and duties add another fuel to the fire and common consumers suffer.
Recently, United States of America witnessed a drop in the fuel prices and the consumers are making merry but in India the situation remains the same as the fuel prices nearly at a century mark per litre. It is time that government also needs to tell the oil companies to pass on the benefits of the international crude oil price drop to the common consumers.
