New Delhi: Oil minister Dharmendra Pradhan on Monday ruled out a rethink on free market pricing in the backdrop of India’s diesel price reaching an all-time high and the petrol price registering its peak since 14 September 2013.

While announcing the roll-out of the world’s cleanest vehicle fuel—Bharat Stage VI, or BS VI, fuel—in Delhi that will help improve its air quality levels, Pradhan said there won’t be any “knee-jerk reaction" with the government balancing the twin goals of development and consumer’s interest. 

Diesel was priced at 64.69 per litre in the national capital on Monday. Petrol prices also registered a peak of Rs73.83 per litre in Delhi, since the record Rs76.06 per litre reached on 14 September 2013.

In a related development, in reply to a query about whether the government is looking to review excise duty levied on petroleum and diesel, finance secretary Hasmukh Adhia said, “Not as of now," and added, “It is a demand. We will let you know if we review it."

Pradhan also pitched for states reducing their value added tax (VAT) in the backdrop of the centre reducing the excise duty on petrol and diesel.

“When there is a price issue, respective states should respond accordingly," Pradhan said.

In June, India’s three government-run oil marketing companies—Indian Oil Corp. Ltd (IOCL), Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL)—introduced dynamic fuel pricing joining countries such as the US and Australia, where fuel prices change daily depending on global oil price fluctuations. 

“Energy is an international commodity," Pradhan said, adding any increase or decrease in crude oil prices are passed on to the consumers by state-run oil marketing companies.

A supply cut by the Organization of the Petroleum Exporting Countries (Opec) and Russia has led to a rally in global oil price. This has resulted in the cost of Indian basket of crude, which averaged $47.56 a barrel in 2016-2017, touching $63.80 (average price) in March 2018, according to information from Petroleum Planning and Analysis Cell. According to Indian Oil Corp., price was $76.84 a barrel on 2 April. 

The Indian basket represents the average of Oman, Dubai and Brent crude. 

“We are concerned (about the impact on consumers). We are keeping a close eye on the developing international oil scenario," Pradhan said.

Experts called it a prudent move.

“Our exchequer’s status cannot be put to jeopardy by again bringing price control. The cost, as also the economic value, of the fuels ought to be seen in their prices," said Deepak Mahurkar, leader (oil and gas practice) at PwC India.

Pradhan also stressed upon the inclusion of petroleum products under goods and services tax (GST) which, in turn, will help consumers.

“We are hopeful that the GST council is moving towards it," Pradhan said.

The centre is in favour of bringing petroleum products under the new indirect tax regime. At present, petroleum products are included under GST, in line with amendments to the Constitution. But GST will start to be levied on petroleum products only once the GST Council—the representative body comprising the Union finance minister and state finance ministers—approves the move. Any decision in the GST Council needs the support of three-fourths of the members. The central government has one-third voting share and the state governments the remaining. 

Remya Nair & Press Trust of India contributed to the story.