Fuel prices will likely have to rise by ₹ 8 to ₹ 10 to offset the significant surge in crude oil since the last revision more than three months ago, but it depends on several factors, according to NDTV sources.
Across metro cities, fuel prices remained unchanged on Thursday, March 3, 2022. That is the most extended duration when the rates have remained static since the daily revision of prices began in June 2017.
But energy prices have jumped during this period driven by supply concerns from the Russia-Ukraine conflict, with crude oil within a whisker of $120 on Thursday before pulling back to around $114.
Crude prices have jumped significantly, about 25 per cent during that period.
The price revision necessary in the retail price of petrol and diesel to offset the rise in crude oil prices in this period is expected to be approximately ₹ 8 to ₹ 10 per litre, according to sources to NDTV.
If the government approves the release of crude oil from its reserve stock, the quantum of increase required in retail fuel prices would be reduced. The other option, of course, is to reduce Excise Duty and Value Added Tax. So, the exact quantum of increase necessary in the retail price of petrol and diesel would depend on many variables, they added.
The central government had cut excise duty on November 4, 2021, to give relief from prices that had reached an all-time high level. The government had slashed the duty on petrol by ₹ 5 per litre and diesel by ₹ 10 a litre, leading to a substantial reduction in fuel prices.
Later in December 2021, the Delhi government had reduced the value-added tax on petrol from 30 per cent to 19.40 per cent. With this, petrol prices in the national capital were slashed by ₹ 8.56 per litre.
Indian oil companies are expected to take a call soon on increasing petrol and diesel prices to factor in the recent rise in crude oil prices.