India: Karnataka: Fuel prices kept unchanged for six days

• State oil companies have not revised prices of petrol and diesel for almost a week in an apparent suspension of their freedom to alter prices daily in line with fluctuations in international fuel and exchange rates.
• Prices of petrol and diesel have remained unchanged at Indian Oil filling stations in Delhi since 24 Apr 18 till 29 Apr 18, even though international fuel rates and the currency fluctuated every day.
• State companies had previously kept prices unchanged during 16 – 19 Apr 18. Shares in Indian Oil, Bharat Petroleum and Hindustan Petroleum — that control more than 90% of fuel retailing —have lost 9-16% since 11 Apr 18, when a media report said the government had asked oil retailers to hold rates and absorb part of the hike ahead of Karnataka polls.
• The government as well as the state oil companies have repeatedly denied any such directive but analysts are barely convinced, given the disinclination among oil firms to revise prices lately.
• Petrol and diesel have been decontrolled for years in India but it is widely believed that the government nudges oil companies to go slow in raising prices before elections, and companies make up for the loss by sharply increases afterwards.
• Government controlled companies synchronise their pricing efforts, keeping rates at their respective pumps within a few paise of each other.
• Price of crude oil, and consequently, that of petrol and diesel has been flaring lately in the international market due to a combination of factors including healthy oil demand, supply cut by key oil producers and fears of US sanctions on Iran, a big oil producer.
• Crude oil is trading close to USD75 a barrel, up 55% since 1 Jul 18. Prices of petrol and diesel too have risen by INR 11.54 per litre and INR 12.6 per litre in Delhi since 1 Jul 17.
• Oil minister Dharmendra Pradhan chimed in, saying that the government is concerned about rising fuel prices though he did not clarify on whether the Centre would intervene to ease the pricing pressure on consumers.
• The central government had cut excise duties on petrol and diesel by INR2 per litre early Oct 17 to limit the impact of sharp price rise. But a surge in oil price negated the effect of duty cut quickly and, as a result, diesel is now selling at record prices while petrol is at a nearly five-year high.
• Between Nov 14 and Jan 16, when crude oil prices were declining, the Centre had raised excise duty INR 11.77 per litre on petrol and INR 13.47 on diesel. Now with prices flaring, there is a demand to roll back some of these duties.

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