Daily fuel repricing on slippery terrain

Retail price increases, freeze on price changes dominate since 2020-21, as per official data

July 28, 2022 08:37 pm | Updated 10:17 pm IST - NEW DELHI

Retail fuel prices have been frozen since May 22

Retail fuel prices have been frozen since May 22 | Photo Credit: GIRI KVS

Oil marketing companies, who were allowed to alter retail petrol and diesel prices daily in June 2017, are having their worst year yet in terms of actually exercising the price reset tool — they have tweaked fuel prices just six times in the first 111 days of 2022-23.

Retail fuel prices have been frozen since May 22 after the Centre announced excise duty cuts of ₹8 and ₹6 per litre of petrol and diesel, respectively. Similar tax cuts of ₹5 and ₹10 per litre on the two fuels, announced on November 4, 2021, were followed by a record 137-day freeze from November 2021 to March 2022.

The government on Thursday parried parliamentarians’ queries about any financial burden arising from these price freezes and whether retail prices of petrol and diesel were actually linked to the international crude price ‘as claimed by the oil marketing companies’. 

Minister of State for Petroleum and Natural Gas Rameswar Teli said oil marketers were free to change petrol and fuel prices, while retail CNG price was determined by city gas distribution entities. The Centre only ‘modulates’ the effective price for domestic LPG, he noted.

While petrol and diesel prices had been made market-determined with effect from June 2010 and October 2014, respectively, Mr. Teli said daily revision of prices, based on global prices and the rupee-dollar exchange rate, by public sector oil marketing companies was implemented on June 16, 2017.

Data shared by the Ministry showed petrol prices were unchanged for 280 days and diesel prices for 279 days in 2021-22, the highest period of inaction since the onset of the daily price reset regime. These numbers were 279 and 268 days, respectively, for petrol and diesel in 2020-21, affected by the onset of the pandemic.

Over those two years, petrol prices were raised 154 times and reduced 17 times, while diesel prices were increased 149 times and cut 34 times. In 2022-23, till July 20, prices have been raised for both fuels five times and reduced once.

“Daily pricing has been introduced to bring more transparency and efficiency in pricing to benefit consumers,” the Minister noted in response to a query from Lok Sabha MP Thol Thirumaavalavan, adding that firms had not only raised prices but also reduced them in line with international market prices.

Data for the first three years of the daily fuel repricing regime shows the ratio of increases to decreases in prices was not as steep as in the past two years and the number of days prices were unchanged was also lower. 

Between June 2017 and March 2020, diesel prices were raised 393 times, reduced 312 times, and left unchanged on 320 days. Similarly, petrol prices were increased on 409 occasions, reduced 320 times and remained unchanged on 296 days. 

“The prices of petroleum products in the country are linked to the price of respective products in the international market. LPG prices are based on Saudi Contract Prices (CP) and Saudi CP has risen from $236/MT in April 2020 to $750/MT in June 2022, a rise of 218%. However, the Government continues to modulate the effective price to consumer for domestic LPG,” he said.

“Central government takes into account all relevant factors and has made interventions by way of calibrating excise duty rates on these products as and when required,” Mr. Teli said in response to another MP Ramshiromani Verma’s query about petroleum product prices.

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