At a time when crude oil prices have fallen dramatically to an 18-month low in the international market, and petrol prices should have been reduced by around Rs. 2 to Rs. 2.50 per litre, the continued volatility in the value of the rupee against the dollar has hampered extending this relief in the form of reducing retail petrol prices in the country.
The continued downslide in the value of the rupee, to an all-time low of Rs. 57.30 to a U.S. dollar, has made imports very costly, cancelling the profits of falling crude prices, and forcing the Oil Marketing Companies (OMCs) to adopt a wait-and-watch policy. “The oil companies are fully cognisant of this. They are watching the volatility in rupee and global crude oil prices. Very soon, they will take a decision,” Petroleum and Natural Gas Minister Jaipal Reddy told journalists here.
OMCs review the petrol prices on the 1st and 16th of every month, based on average imported cost, and forex rates of the previous fortnight. However, they left the review this time around on June 16, and decided to stick with the present prices. “There is a lot of volatility in prices of crude oil and the value of the rupee. There is double volatility. We are relieved that the price of crude oil has eased. But this has been upset by the decrease in the value of the rupee. We are watching the situation with keen interest, and we are watching it on a day-to-day basis. For a nation that is 76 per cent-dependent on imports to meet its requirements, the value of the rupee becomes very important,” Mr. Reddy remarked.
Officials in the OMCs said all the three companies — Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL) — will watch the situation during the next few days, and continue to hold on to petrol prices, before taking a call on reduction.
The oil companies had last reduced petrol prices by Rs. 2.02 a litre, with effect from June 3, in a partial rollback from the steep Rs. 7.54 per litre hike effected last month. Petrol, at present, costs Rs. 70.24 in Delhi.
The last revision was done keeping in mind the average $115.77 per barrel rate of gasoline, against which domestic petrol prices are benchmarked. Gasoline rates have since fallen to $106.93 per barrel. But the rupee has devalued to Rs. 55.69 per dollar, from Rs. 54.96 per dollar (average of the first fortnight of June).
OMC officials confessed that there was a scope for reduction of petrol prices by around Rs. 2 to Rs. 2.50 per litre but with the rupee again tumbling, things have gone wrong.