What Consumers Pay For Petrol, Diesel After Price Cuts
The government’s decision to lower auto fuel prices by Rs 2.50 a litre will cushion consumers. Yet, they will continue to pay more than what they did a month ago, at least in the top four metro cities.
That’s because a rise in crude oil prices and a weaker rupee negated the price cut. Prices of Brent crude rose 9 percent and the rupee depreciated 2.8 percent during the month. So, despite the central government announced price cut, prices of petrol and diesel remain higher than September in Mumbai, Delhi, Kolkata and Chennai.
On Oct. 4 the central government lowered excise duty by Rs 1.50 a litre and asked state-run oil marketers to cut price by Re 1 a litre. That was aimed at checking a substantial rise in retail prices on the back of a 28 percent surge in Brent crude prices this year and a 13 percent depreciation in the Indian rupee in the same period.
Finance Minister Arun Jaitley urged states to match the central government tax cut with an equivalent reduction in value-added tax. Chief Ministers of at least 12 states where Prime Minister Narendra Modi’s Bharatiya Janata Party is in or shares power lowered the levy by Rs 2.50 on petrol and diesel—except Maharashtra that cut the tax on diesel by Re 1 as on Oct 4.
Since yesterday, prices of auto fuels have declined the most in Assam and Madhya Pradesh, followed by Jammu & Kashmir, Chhattisgarh and Arunachal Pradesh. All of them lowered VAT.
While these states each reduced VAT by Rs 2.50 a litre, the effective benefit varies because of a difference in logistics and other costs.
BJP-ruled Haryana, Goa, and Uttarakhand were among the states where prices fell the least as the announced cut in VAT didn’t reflect in retail prices at least on Oct. 5. The rest of the states didn’t lower the levy so consumers only got the benefit of the central government’s price cut.
Excise Windfall Continues For Modi
Despite the two excise duty cuts in as many years, the Modi government’s levy on petrol is still nearly twice of what it was four years ago. On diesel, it’s three times the tax compared with 2014.
As a result, its excise duty collection on fuel jumped 2.3 times since 2014-15, to nearly Rs 2.29 crore in 2017-18. For the first quarter of the ongoing financial year, the mop-up stood at close to Rs 43,000 crore.
Oil Retailers Lose Rs 73,000 Crore In Market Value
Investors were spooked by the central government’s decision to ask state-run oil retailers to absorb a Re 1 price cut per litre despite the sector having witnessed price de-regulation a few years. Shares of oil marketing companies declined sharply for the second straight day, bringing valuations to their lowest in four years, according to Bloomberg.
The cut in fuel prices is expected cost the oil marketers nearly Rs 7,000 crore—or about 18 percent of their net profit for the year ended March 2018—according to Deven Choksey, managing director at broking house KR Choksey.