NEW DELHI: Fuel prices are likely to be raised further to close the gap between domestic pump prices and international benchmarks but it is high taxes that are pushing rates to record levels, Sanjiv Singh, chairman of India’s largest refiner-retailer, IndianOil, said on Wednesday.
Singh’s comment came on the day diesel, at Rs 79.88 a litre, became costlier than petrol by 12 paise in Delhi after the retailers raised its price for the 18th consecutive day. Petrol price was left alone after increasing it for 17 days. This is the first time-ever that diesel, consumed by transporters and farmers, has overtaken petrol anywhere in the country.
“The Delhi government had increased VAT on petrol from 27% to 30% and that on diesel from 16.75% to 30% on May 5. This massive hike in VAT resulted in rates going up by Rs 1.67 per litre for petrol and by a record Rs 7.10 for diesel on a single day,” Singh said in reference to how high taxes amplify the impact of revisions in base prices.
Singh said the companies resumed daily price revisions after international markets stabilised. This included passing on the excise duty increase. “While we had negative cracks (margins or difference between crude and refined product prices), individual states raised VAT and central excise was also hiked.” he said.
The Centre on March 14 hiked excise duty on petrol and diesel by Rs 3 per litre each. Again on May 5, the duty was hiked by a record Rs 10 per litre on petrol and Rs 13 on diesel.
“Today nearly 70% of the fuel prices are taxes and other charges such as transportation that are more or less fixed. We deal with only 30% (base price) that is benchmarked to international rates. With demand coming back and crude rising, cracks are also rising. So even if oil prices are to stabilise, it is quite likely that (fuel) prices may still rise,” he said.
On why prices have been raised continuously for the last 18 days since the retailers resumed daily revisions, Singh said the pricing is linked to the Arab-Gulf marker, which like other product price benchmarks, is rising as demand returns on resumption of economic activities around the world.
Buttressing his argument, the IOC chairman pointed out how diesel in all other cities is still priced lower than petrol — the difference between the two being the highest at Rs 9.50 per litre in Pune and Rs 3.50 in most state capitals.
Diesel price in Delhi has gone up by Rs 10.49 per litre in the last 18 days. Petrol has risen by Rs 8.5 a litre in 17 days. Consumers pay Rs 50.69, or 64% as taxes on each litre of petrol. Central excise accounts for Rs 32.98 and VAT Rs 17.71. For diesel, they pay Rs 49.43, or 63% as taxes. Central excise account for Rs 31.83 and VAT Rs 17.60.
Diesel costs more in Rajasthan at Rs 80.68 but it is still Rs 6.17 cheaper than petrol. Similarly in Mumbai diesel costs Rs 78.22, while petrol Rs 86.54 a litre. In Chennai, petrol is sold for Rs 83.04 and diesel for Rs 77.17. In Kolkata, petrol is priced at Rs 81.45 and diesel Rs 75.06. In Bengaluru, petrol comes for Rs 82.35 and diesel for Rs 75.96. In Hyderabad, petrol is priced at Rs 82.79 and diesel at Rs 78.06.