Oil is on the boil but your petrol bill won’t go up, all thanks to Karnataka polls

A fortnight before Karnataka goes to polls, PSU oil firms have stopped revising petrol and diesel prices even though benchmark international rates have gone up by almost $2 per barrel.

With finance ministry refusing to cut excise duty to give relief to the common man from petrol hitting a 55-month high of Rs 74.63 a litre and diesel at a record high of Rs 65.93, oil PSUs have since April 24 not changed fuel rates.

Daily price notification issued by oil firms showed static petrol and diesel price since April 24.

This is despite the benchmark international rate for petrol going up from USD 78.84 per barrel, which was used for raising the price to Rs 74.63 a litre on April 24, to USD 80.56 now, according to sources privy to fuel pricing methodology.

The benchmark international diesel rates during this period have climbed from USD 84.68 per barrel to USD 86.35. Also, the rupee has weakened to Rs 66.14 to a US dollar from Rs 65.41, making imports costlier.

Oil PSU executives refused to discuss pricing saying they have been asked not to speak on the issue.

“We have been told not to discuss pricing,” said a top official at one of the three state-owned oil marketing firm said. “You can neither quote me or my company on this,” he said.

Oil ministry officials said they don’t have anything to do with pricing and its up to the companies how they price fuel.

Karnataka goes to polls on May 12.

Oil Minister Dharmendra Pradhan had last month denied reports of a directive to state oil firms to absorb at least Re 1 a litre of hike by not raising prices in line with cost.

The prices at petrol pumps of state-owned fuel retailers like Indian Oil Corp (IOC) were cut by 1-3 paisa every day in the first fortnight of December 2017 before Gujarat went to polls.

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.

If this practice was followed in letter and spirit petrol and diesel prices should have been increased by 50-60 paisa a litre in last one week, an analyst tracking the sector said.

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.

Finance Secretary Hasmukh Adhia had last month and Economic Affairs Secretary Subhash Garg had last week ruled out any immediate reduction in excise duty to cushion the increases warranted from spike in international oil price.

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 on petrol by Rs 11.77 a litre and that on diesel by Rs 13.47 per litre to take away gains arising from plummeting global oil prices. This led to its excise mop up more than doubling 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.