As petrol nears Rs 100 per litre mark, why are fuel prices going up across the country

Fuel prices, which vary from state to state depending on local sales tax or VAT, are now at a record high in the country, prompting cries for a cut in excise duty to ease the burden on consumers. Oil Minister Dharmendra Pradhan had earlier blamed Saudi oil output cut for the surge in oil prices but remained non-committal on tax cuts. Top oil explorer Saudi Arabia has pledged additional voluntary output cuts of 1 million barrels per day in February and March, which has led to price climbing to most since the pandemic broke out.

State-owned fuel retailers -- Indian Oil Corporation Ltd (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) -- had on January 6, resumed daily price revision after nearly a month-long hiatus. Since then, rates have gone up almost every week. Giving effect to developments in the global oil markets, OMCs have also been revising the price of auto fuels - petrol and diesel, consecutively for the past seven days.

This has even taken the retail price of normal petrol, which is largely consumed in the country within touching distance of Rs 100 per litre mark. For example - Petrol is priced at Rs 95.46 a litre in Mumbai, Rs 96.96 in Bhopal, Rs 95.44 in Jaipur.

Prior to the current high crude prices triggered the price hikes this month, fuel prices had last touched record high on October 4, 2018. At that time the government had cut excise duty on petrol and diesel by Rs 1.50 per litre in a bid to ease inflationary pressure and boost consumer confidence. Alongside, state-owned fuel retailers cut prices by another Re 1 a litre, which they recouped later. This time, there are no indications of a duty cut so far. Petrol and diesel prices are revised on a daily basis in line with benchmark international price and foreign exchange rates.

Petrol and diesel prices on February 15 were hiked for the seventh day in a row as a rally in international oil prices took retail rates in India to new highs. Petrol price was increased by 26 paise per litre and diesel by 29 paise, according to a price notification of state-owned fuel retailers. This pushed retail rates, which differ from state to state depending on the incidence of local sales tax or VAT and freight charges, to their highest level. The hike took petrol price in Delhi to a record Rs 88.99 per litre and to a highest-ever rate of Rs 95.46 a litre in Mumbai. Central and state taxes make up for over 61 per cent of the retail selling price of petrol and about 56 percent of diesel.