'Petrol, diesel prices may stay high in immediate future': 10 points

Petrol, diesel price hike: People in both metros and non-metropolitan cities are reeling under the record-high fuel prices.
Petrol and diesel will continue to burn a hole in your pocket as Hindustan Petroleum Corporation Limited (HPCL) Chairman and Managing Director Mukesh Kumar Surana has told news agencies that fuel prices might remain high in the immediate future. Petrol prices in the country's financial capital, Mumbai, touched Rs 84.99 a litre on Wednesday, while the fuel's price inched higher to a new record of Rs 77.17 in Delhi. In Delhi, Kolkata, Mumbai, and Chennai, diesel was sold at Rs 68.34, Rs 70.89, Rs 72.76, and Rs 72.14 per litre, respectively.    

As of Wednesday, one trigger after another had led to the 10th consecutive day of increase in retail selling price of petrol and diesel. As frustrations mounted across the country, Union Law & Justice, Electronics, and Information Technology Minister Ravi Shankar Prasad on Wednesday said that the Narendra Modi government was working on a long-term plan to tame fuel prices. "Instead of an ad-hoc measure, the government wants to have a long-term view that addresses not only volatility but also takes care of the unnecessary ambiguity arising out of frequent ups and downs," Prasad said. 

The government has come under attack from the Opposition as fuel prices have gone up day after day. Former finance minister P Chidambaram claimed that the rates could be reduced by Rs 25 per litre but the government was not doing so. "It is possible to cut up to Rs 25 per litre, but the government will not. They will cheat the people by cutting price by Re 1 or Rs 2 per litre of petrol," he said in a Tweet.   

Here are ten top points on rising petrol and diesel prices:  

1) Congress protesting in Mumbai today as petrol nears Rs 85 a litre: The Congress targeted the Narendra Modi-led government at the Centre over high fuel prices, seeking to know why the petrol and diesel rates have gone up despite a fall in international crude oil prices. The party said it would hold a protest in Mumbai on Thursday over the matter. Mumbai Congress president Sanjay Nirupam said the residents of the city are paying the highest in the country for petrol and diesel.   

Petrol prices in Mumbai touched Rs 84.99 a litre on Wednesday, while diesel was sold at Rs 72.76 per litre.  

2) HPCL chief says review taxes on petrol, diesel: HPCL CMD Mukesh Surana on Wednesday said that there is a need to review taxation on petrol and diesel to provide relief to consumers. According to Surana, the solution has to be found while balancing the budgets of oil companies, the consumer, and the government. 

ALSO READ: Petrol, diesel price hike: Guide for middle-class Indians on fuel prices   

3) 'Petrol, diesel prices might stay high in immediate future': In the immediate future, fuel prices might stay high, Surana told news agency ANI. He said that there is an Organization of the Petroleum Exporting Countries (OPEC) meeting scheduled to take place soon from where some triggers might come. "If OPEC countries increase production of oil, that could help fix the perception of high demand and less supply," he said. 

There's an OPEC meeting is scheduled to take place soon, some triggers might come from there, if OPEC countries increase production of oil that could help fix perception of high demand&less supply,but in immediate future fuel prices might stay high: Mukesh K Surana, HPCL Chairman pic.twitter.com/GWb0VwHFu8

— ANI (@ANI) May 23, 2018

4) Government has not called meeting with OMCs over rising fuel prices? Surana on Wednesday also said that he was not aware of any meeting called by Oil Minister Dharmendra Pradhan or anyone else in the government to discuss the rising fuel prices.  

5) GST the solution for high fuel prices? The HPCL CMD said that the long-term solution was bringing petroleum products under the Goods and Services Tax (GST) regime. He also said that it was not true that oil companies were making a big profit with rising prices. He added that they were only passing on the cost of input to consumers.   

The GST, which subsumed over a dozen central and state levies, including excise duty, service tax, and VAT, was implemented from July 1, 2017, but crude oil, natural gas, petrol, diesel, and aviation turbine fuel were kept out of its purview.

ALSO READ: Govt can reduce petrol price up to Rs 25 but won't do: Chidambaram

6) GST on fuel not possible until all state FMs agree, says MoS Finance: Minister of State (MoS) for Finance Shiv Pratap Shukla on Wednesday said that imposing GST on fuel would not be possible until and unless all state finance ministers agreed. "Crude is imported. Foreign companies are raising price. Petroleum minister has said petrol and diesel should be brought under GST. Point is, it can't be brought before the Council until and unless all state finance ministers agree," Shukla said.      

7) Govt to lose Rs 130 billion over every rupee cut in excise duty: The Centre levies Rs 19.48 excise duty on a litre of petrol and Rs 15.33 on diesel. State sales tax or VAT varies from state to state. Unlike excise duty, VAT is ad valorem and results in higher revenues for the state when rates move up. In Delhi, VAT on petrol was Rs 15.84 a litre, and Rs 9.68 on diesel in April. Today, it is Rs 16.41 on petrol and Rs 10.05 a litre on diesel.

Every rupee cut in excise duty on petrol and diesel will result in a revenue loss of Rs 130 billion (Rs 13,000 crore).

ALSO READ: Petrol at record high: Bring fuel under GST, say commuters, IOCL, Congress 

8) Three-way burden sharing mooted to lower fuel prices: Among the proposals being discussed by the government to tackle rising fuel prices is that OMCs, too, should be asked to take a small hit by way of compensating petrol and diesel dealers a cut in their commission. Along with an excise duty reduction, such a cut would be passed on to consumers. This would be a three-way burden-sharing model between the government, OMCs, and consumers.   

9) Petroleum minister will meet oil companies, says Amit Shah: BJP President Amit Shah on Tuesday said that the government was working on a plan to check the spike in fuel prices. "The government is taking the matter of oil prices seriously. Petroleum minister will have a meeting with the officials of the oil companies. We are trying to work out a formula to reduce the prices in the next three to four days," Shah had said.   

10) Excise on fuel raised 9 times between Nov 2014 and Jan 2016: To shore up finances as global oil prices fell, the government had raised excise duty nine times between November 2014 and January 2016. Subsequently, the government had cut the tax just once in October last year by Rs 2 a litre. Subsequent to that excise duty reduction, the Centre had asked states to also lower VAT. Just four of them -- Maharashtra, Gujarat, Madhya Pradesh, and Himachal Pradesh -- reduced rates, while others, including BJP-ruled ones, ignored the call.  

In all, duty on petrol rate was hiked by Rs 11.77 and that on diesel by Rs 13.47 a litre in those 15 months. This helped government's excise mop up more than double to Rs 2.42 trillion (Rs 2,42,000 crore) in 2016-17 from Rs 990 billion (Rs 99,000 crore) in 2014-15.    
With agency inputs

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel