The prices of both petrol and diesel fuels in India have scaled record new highs as they continue their upward march. This is despite global crude prices staying low and dropping by nearly 50% to around US$ 38 a barrel from around $75 earlier this year.
The price of petrol in Mumbai rose today (Saturday, June 20) by 49 paise to hit Rs 85.70 per litre. Meanwhile, diesel saw an increase of 58 paise to take the price of the fuel to Rs 76.11 a litre. The price increases mark 20-month highs for the two fossil fuels. With today’s hike, prices of these two fossil fuels have cumulatively risen by Rs 7.60 (petrol) and Rs 8.25 (diesel) per litre in the past 14 days.
FUEL PRICES AS OF JUNE 20 (per litre)
Mumbai: Rs 85.70
Chennai: Rs 82.27
Kolkata: Rs 84.14
Excise duty on fuels hits Indian motorists' wallets hard
It may be recollected that on May 6, the government had sharply increased excise duty on the two fuels – Rs 10 per litre on petrol and Rs 13 per litre on diesel – aimed at generating an estimated Rs 1.6 lakh crore of additional revenue.
As of June 16, the excise duty component on petrol in Delhi (priced at Rs 76.73 then) was Rs 32.98 a litre, which makes up for 43% of the petrol litre. Diesel (priced at Rs 75.19 on June 16) includes an excise duty of 42.33% at Rs 31.83 per litre. See detailed price build-up tables below. The split for the very latest petrol and diesel price build-up is not yet available in the public domain.
Historically, motorists in India have not benefitted from low global crude oil rates. Last month, crude oil had dropped to a record low of $20 per barrel but a commensurate benefit did not accrue to them.
India, which is the world's third largest oil consumer, imports about 84 percent of its fossil fuel needs. Industry estimates have it that if crude prices rise by $1 per barrel, the country’s net import bill will increase by Rs 3,029 crore and vice-versa. Further, if the exchange rate rises by a rupee to a dollar, the net import bill will increase by Rs 2,473 crore. This not only means a huge bonanza in terms of savings for Indian oil marketing companies but also potential lower automotive fuel prices for motorists, as it would translate to much lesser petrol/diesel bills.
However, if past trends are any indicator, then it will be safe to assume that all the benefits of lower crude are unlikely to get passed on to the end consumer. The Central and State governments have in the past raised the duties and taxes in order to shore up additional revenue collection.
The ongoing price hike in petrol and diesel prices comes at a time when the automobile industry and motorists can least afford it. The Covid-19 pandemic, a prolonged economic slowdown that threatens to continue, the automobile industry gingerly returning to production, and consumers preferring to delay purchases. The ongoing fuel price hikes just add to the cocktail of bad news.
Diesel inches closer to petrol price
With today’s price increase in the two fuels, the price differential between petrol and diesel in Mumbai has also reduced to one of the lowest ever – at Rs 9.59 per litre, which means petrol cars seem to have as good an operational benefit as their diesel siblings.