Home / Industry / Energy /  Calls for govt intervention in fuel prices get shriller

New Delhi: With retail diesel and petrol prices in India setting new records every other day, there is growing clamour for government intervention. Fuel prices touched a new high on Sunday on the back of continuing rise in global crude oil prices and a depreciating rupee. Diesel and petrol prices on 9 September reached 72.61 per litre and 80.50 per litre in Delhi, respectively.

However, despite demands of a rollback of hike in fuel prices by opposition parties, the National Democratic Alliance (NDA) government has held its nerve by not intervening in the price rally. The Congress has announced a nationwide protest today on the issue, and has reached out to key opposition parties to lend support to the event demanding excise duty cut on petrol and diesel.

“I don’t think there has been any change in the government’s stand. Also, we need to understand the impact of the US sanctions on Iran that kicks in from 4 November. One needs to study that," said a senior government official, requesting anonymity.

The US is pressing its allies to end all imports of Iranian oil by early November. President Donald Trump had earlier pulled the US out of a historic 2015 accord, which was inked to curb the Islamic republic’s nuclear programme in return for ending sanctions.

Any rally in global crude oil prices will impact India’s oil import bill and trade deficit. Every dollar increase in oil prices will push up the import bill by around 10,700 crore on an annual basis. India is the world’s third-largest oil importer.

Petrol prices were deregulated in June 2010 by the Congress-led United Progressive Alliance (UPA) government. Subsequently, Prime Minister Narendra Modi-led government decontrolled diesel prices in October 2014.

The cost of the Indian basket of crude rose to $76.67 a barrel on 7 September, according to Petroleum Planning and Analysis Cell. To this, taxes at the central and state levels are added, besides dealers’ commission, to arrive at the retail price. The Indian basket represents the average of Oman, Dubai and Brent crude.

“All options are being evaluated. We are sensitive to the issue," said another government official, requesting anonymity.

Experts, however, believe that some steps must be taken. “With continued volatility in crude prices and exchange rates due to global factors, retail fuel prices have reached a level that’s hurting consumers on the street. Hope both the central and state governments will take short-term measures to ease this by reducing excise and value-added tax (VAT) rates, and make all efforts to bring fuels under GST (goods and services tax) in the medium-term," said Debasish Mishra, leader—energy, resources and industrials—at consulting firm Deloitte Touche Tohmatsu in India.

Of the 8 trillion of excise, service tax and GST collected last year, petroleum and petroleum products accounted for 36%, says CARE Ratings. Petroleum products accounted for around 20% of states’ tax revenues. While the centre’s excise rate is fixed at 20 per litre on petrol and 15.25 on diesel, VAT or sales tax rates vary from 16% to 39.5% across states. For diesel, it varies from 25% to 11.5%.

The NDA government has maintained that it has no role in the pricing and has backed the reform, wherein state-run oil marketing companies continue to decide automobile fuel prices. The OMCs had refrained from increasing prices in the run-up to the Karnataka elections.

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