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The government was said to have informally directed state-owned fuel retailers not to raise petrol and diesel prices in the run-up to the December 2017 assembly elections in Gujarat. By some accounts, as much as 45 paisa increase warranted in petrol and diesel rates was not passed on.
This time around Indian Oil Corp (IOC), Hindustan Petroleum Corp Ltd (HPCL) and Bharat Petroleum Corp Ltd (BPCL) have reportedly been asked to absorb up to Re 1 a litre hike.
“No, we haven’t heard from the government anything (on dropping daily price revision),” IOC Chairman Sanjiv Singh told reporters on sidelines of the IEF Ministerial meeting here.
HPCL Chairman and Managing Director M K Surana too said the company is not aware of any directive to oil companies not to pass on the rise in international oil prices.
Oil Minister Dharmendra Pradhan refused to take questions on government dictate that essentially would mean a reversal of reforms.
Shares of IOC fell as much as 7.6 per cent after the news of government asking oil firms to not raise prices broke. HPCL lost as much 8.3 per cent.
The government had in June 2010 freed petrol price from its control and the diesel rates were deregulated in October 2014. Prices have since then moved more or less in tandem with international rates barring a few exceptions like the period before a crucial election.
The prices at petrol pumps of state-owned fuel retailers like IOC were cut by 1-3 paisa every day in the first fortnight of December. They started moving up immediately after polling for assembly elections in Gujarat concluded on December 14, leading to speculation that government may have asked oil companies to hold on to the prices.
State-owned oil companies in June last year dumped the 15-year old practice of revising rates on 1st and 16th of every month and instead adopted a dynamic daily price revision to instantly reflect changes in cost.
Incidentally, oil companies did not change rates at their pumps today. Petrol price continues to cost Rs 73.98 a litre in Delhi, the highest in four years, while diesel rate continues to rule at record levels of Rs 64.96.
After hitting a low of $27.1 per barrel in 2016, Brent crude is currently trading around $70 level. Finance Secretary Hasmukh Adhia had last week ruled out any immediate reduction in excise duty to cushion the increases warranted from rise in international oil prices.
The BJP-led government had raised excise duty nine times between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre.
The government had between November 2014 and January 2016 raised excise duty, taking away gains arising from plummeting global oil prices.
In all, duty on petrol rate was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months that helped government’s excise mop up more than double to Rs 2,42,000 crore in 2016-17 from Rs 99,000 crore in 2014-15.
The central government had cut excise duty by Rs 2 per litre in October 2017, when petrol price reached Rs 70.88 per litre in Delhi and diesel Rs 59.14. Because of the reduction in excise duty, diesel prices had on October 4, 2017 come down to Rs 56.89 per litre and petrol to Rs 68.38 per litre.
However, a global rally in crude prices pushed domestic fuel prices far higher than those levels.