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State-run fuel retailers may not immediately revert to daily pricing of two auto fuels
State-run fuel retailers Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation have stopped losing money on sales of petrol and diesel, but may not immediately revert to daily pricing of the two auto fuels because of economic and political compulsions, three people aware of the matter said
Although international oil prices have softened significantly since their June 2022 peak, these companies do not consider it an appropriate time to restore the daily-pricing mechanism because crude oil prices are volatile, retail inflation is high, and assembly elections are due in crucial states such as Tripura and Karnataka, they added, requesting anonymity.
“The fuel price situation has improved significantly as compared to mid-2022. On average OMCs (oil marketing companies) now have positive margins. That is why the Budget has also reduced LPG [liquefied petroleum gas or cooking gas] subsidy for 2023-24. Petrol and diesel are deregulated products and oil companies are free to adjust their retail prices accordingly. There is no provision in the Budget to help oil PSUs for their losses on petrol and diesel,” one of the three, a senior government official, said
Budget 2023-24 proposed a ₹22.5709 billion LPG subsidy, 61% lower than ₹58.1250 billion Budget Estimate (BE) for 2022-23, which was later raised to ₹9170.50 in the revised budget (RE) of FY23. Apart from that, the government gave a one-time grant of ₹220 billion to state-run oil marketing companies (OMCs) for their revenue losses on the sale of cooking gas in RE of FY23.
State-run OMCs have not changed pump prices of petrol and diesel since April 6, 2022, when they were last raised to ₹105.41 per litre and ₹96.67 a litre respectively in Delhi. In May 2022 the Central government steeply reduced excise duty on petrol and diesel for the second time (the first reduction took place in November 2021; total central excise reduction was ₹13 a litre and ₹16 on the two fuels, respectively) to calm raising inflation. This was also followed by cuts in value-added taxes by several states. Consequently, petrol and diesel rates came down to ₹96.72 per litre and ₹89.62, respectively, in Delhi on May 22, 2022. Fuel rates vary across the country due to local levies.
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