Petrol and diesel prices were on Thursday hiked for the first time in more than a month on the back of rising international rates and weakening rupee.
The increase of 16 paisa a litre in petrol and 12 paisa a litre in diesel came after an eight-day self-imposed hiatus in rate revisions by the State oil firms in anticipation of softening international rates due to the Organization of the Petroleum Exporting Countries' (OPEC) decision to raise output by 1 million barrels a day.
The petrol price in Delhi climbed to ₹75.71 a litre from ₹75.55 and diesel to ₹67.50 a litre from ₹67.38, according to a price notification from the Indian Oil Corp. (IOC).
IOC, Bharat Petroleum Corp Ltd. (BPCL) and Hindustan Petroleum Corp Ltd. (HPCL) had not revised petrol and diesel prices since June 26.
“We had not changed prices for a few days in anticipation the OPEC decision to raise production, leading to softening of international rates. But the 1 million barrels of additional production, which was to kick-in from July, has been overdone by the Iran issue,” IOC Chairman Sanjiv Singh told PTI in New Delhi.
While the OPEC last month decided to raise production, the U.S. is piling pressure on India, China, and other buyers to end all imports of Iranian oil by a November 4 deadline in a bid to choke the Persian Gulf state’s economic lifeline with sanctions over its nuclear programme.
Mr. Singh said Iran produces around 2.3 to 2.5 million barrels a day and the world searching for alternates to replace those volumes has put pressure on the prices.
The decision to hold on to rates was taken without any elections looming around, he said, adding international prices have risen post-OPEC decision and oil companies have to “adjust retail rates accordingly“.
The State-owned oil firms, who in mid-June last year dumped 15-year practice of revising rates on 1st and 16th of every month in favour of daily price revisions, last changed the prices on June 26, when the petrol price was cut by 14 paise and diesel by 10 paise.
In the preceding month or so, rates had been cut in line with dropping international rates. On May 30, the prices hit an all-time high of ₹78.43 a litre for petrol and ₹69.31 per litre for diesel.
That peak triggered demands for a reduction in excise duty, but the government ruled out any immediate cut.
The Union government now levies a total of ₹19.48 a litre of excise duty on petrol and ₹15.33 on diesel. On top of this, the States levy Value Added Tax (VAT) — the lowest being in the Andaman and Nicobar Islands, where a 6% sales tax is charged on both the fuel.
Mumbai has the highest VAT of 39.12% on petrol, while Telangana levies the highest VAT of 26% on diesel. Delhi charges a VAT of 27% on petrol and 17.24% on diesel.
The Union government raised the excise duty on petrol by ₹11.77 a litre and that on diesel by 13.47 in nine installments 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 by ₹2 a litre.
This led to its excise collections from petro goods more than doubling in last four years — from ₹99,184 crore in 2014-15 to ₹2,29,019 crore in 2017-18. The States saw their VAT revenue from petro goods rise from ₹1,37,157 crore in 2014-15 to ₹1,84,091 crore in 2017-18.