Fuel price cut only after stabilization of geopolitical scenario

The Union minister for petroleum and natural gas Hardeep Singh on Saturday said that oil marketing companies continue to incur under-recoveries on the sale of diesel.

Responding to a question on the likelihood of cut in petrol and diesel prices, the minister also said that the decision to reduce retail fuel prices would depend of stabilization of geopolitical scenario and international oil prices.

“I will only say that the let the situation of outside world stable, oil prices stable, then it (price cut on petrol and diesel) can be looked at...but if you say an attack is taking place somewhere in the world and insurance and freight price go up..." he said, citing the continued tension in the Red Sea in West Asia, which may bring further volatility in the energy market.

He also noted that the central government has enabled reduction in petrol and diesel prices twice since 2021, with the cut in excise duty in November 2021 and May 2022. The excise on petrol has been cut ₹13 per litre and that on diesel has been reduced by 16% cumulatively in both the occasions. Due to these duty cuts, centre has forgone a revenue of about ₹2.2 trillion, he said.

"Despite production cuts, the global crude oil prices have not increased. This means that the global crude oil market is absorbing it,” he said. 

On Friday, the May contract of Brent on the Intercontinental Exchange closed at $82.08 per barrel, lower by 1.06% from its previous close.

The government has reduced the price of LPG cylinder by ₹100 with effect from Saturday. The move comes days ahead of the announcement of the election dates by the Election Commission of India.

“During the Cabinet meeting the day before yesterday, PM Modi announced that the LPG cylinder subsidy, which was to end on 31 March, will be extended to 2024-25. Yesterday, on the International Women’s Day, he again conveyed his decision to reduce the price of LPG cylinders by ₹100," he said.

Puri further said: “From September 2021 to September 2023, the price (of the cylinders) came down by 4.56% in Delhi. There was no issue related to the availability of cylinders anywhere. When the flood came in the North East, our workers personally delivered the cylinders."

On Thursday, the Union cabinet approved the extension of the ₹300 subsidy on LPG cylinders for Pradhan Mantri Ujjwala Yojana (PMUY) beneficiaries for the next financial year (FY25). The subsidy was to end this fiscal.

In October last year, the subsidy was increased from ₹200 to ₹300 per cylinder for up to 12 cylinders annually. A price cut of ₹200 per cylinder was also announced earlier on 30 August 2023.

PMUY was rolled out in 2016 to provide cleaner cooking fuel to poor households. The beneficiaries were identified through the socio-economic caste census (SECC) list or from seven other identified categories such as scheduled caste households, scheduled tribe households, most backward classes and beneficiaries of PM Awas Yojana (Gramin).