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Crude crash brings no relief to consumers
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SME Times News Bureau | 25 Apr, 2020
This is one reform initiative of the government that has not yielded the
desired results on ground. A collapse in global crude oil prices was
widely believed to provide relief to consumers by way of sharply lower
retail price of petrol and diesel. But the reality has turned out to be
something else.
The auto fuels today maintain almost the same
price levels at pumps that was existing on March 14, when government
raised the excise duty on petrol and diesel by Rs 3 per litre on the
back of a single day more than 30 per cent fall in crude to $35 a
barrel.
Since then (March 14) , crude prices has fallen by
another 40-50 per cent with Indian basket of crude hovering around $20 a
barrel now, but retail prices of petrol and diesel has not fallen to
provide relief to consumers in time of Covid-19 outbreak.
On
March 14, when crude prices were around $35 a barrel, even after
factoring in the higher cost, petrol prices stood at Rs 69.87 a litre
and diesel Rs 62.58 in Delhi. On Saturday, retail price of petrol is
almost at same level at Rs 69.59 a litre and diesel at Rs 62.29 a litre
in Delhi, when Indian basket of crude is hovering around $20 a barrel.
In
fact, oil companies have not revised petrol and diesel prices since
March 16 in complete contravention of policy reforms and daily price
revision mechanism where petrol and diesel retail prices changed every
day.
"A $15 per barrel fall in crude prices since mid-March
should have resulted more than Rs 5 per litre price drop for petrol and
diesel. But it seems oil companies are still providing themselves
cushion for holding back increase when government raised excise duty on
products last month and anticipating a further increase in future now,"
said a former top executive of public sector oil marketing asking not to
be named. Oil companies are also facing a 50 per cent slump in sales of
product due to lockdown that has started affecting their financials.
Analysts estimate that petrol and diesel prices fall by roughly 40 paisa per litre with each $1 per barrel fall in crude prices.
Continuing
higher prices of petroleum products at retail levels also becomes
uncomfortable for consumers even if track historical data. In June 2014,
when the price of crude oil stood at $109.1 a barrel, petrol and diesel
were retailing at Rs 71.51 a litre and Rs 57.28 a litre, respectively.
Since then government has raised excise duty on the two products on 12
occasions while reducing it only twice.
Petrol and diesel prices
in India are linked to product prices and not crude where the fall has
not been to that extent. Moreover, much of gains of lower crude oil
prices has been offset by the falling rupee that makes oil imports that
much expensive, said an executive of country's largest oil retailer.
The
rupee has fallen more than 7 per cent so far this year to also touch
this years lowest level of Rs 76.91 to a dollar earlier in week.
Continuing
with its reform agenda, the Modi government removed diesel from the
administered price mechanism in October 2014. The move was expected to
benefit consumers as oil and product prices had started falling from
then. The UPA government decontrolled petrol price earlier.
But
as the holding back auto fuel price revision for almost 40 days now
indicated that administered price mechanism is back in oil sector albeit
temporarily considering the unprecedented situation arising from
Covid-19 outbreak.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
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64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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