NEW DELHI: Oil marketing companies (OMCs) on Friday reduced petrol price by Rs 2.42 a litre and that of diesel by Rs 2.25 as benefits of slump in crude oil prices globally were not reaching the consumers. Crude oil prices are trading at a six-year low of around $45 a barrel. In June last year, it was at $115 per barrel.
The reduction in price of these two fuels would have been almost double but for as the government raised excise duty by Rs2 per litre on both petrol and diesel on Friday.
This is the fourth hike in excise duty since November and cumulatively customers have been denied the benefit of Rs7.75 per litre cut in petrol and Rs6.50 a litre cut in diesel a rate that was warranted due to the slump in oil price to $45 a barrel.
A Finance Ministry notification said the excise duty on unbranded petrol is being hiked to Rs8.95 per litre and that on unbranded diesel to Rs7.96 per litre.
The four excise duty hikes will result in about Rs 20,000 crore in additional revenue this fiscal and will help the government meet its fiscal deficit target of 4.1 per cent of the GDP without stoking inflation.
Petrol and diesel prices were last cut on December 16 by Rs 2 per litre each.
Including current reduction, petrol price have been cut by Rs14.69 per litre on a cumulative basis since August, while diesel rates in five downward revisions have been slashed by a total of Rs10.71 a litre.
The Finance Ministry notification said the excise duty hike will be effective from midnight tonight.
Earlier in the day, Petroleum Minister Dharmendra Pradhan responding to criticism of oil firms not cutting despite near 4 per cent fall in global rates since January 1 said “the pricing was not in our hands” as the both petrol and diesel have been deregulated.
“What oil companies feel appropriate they will do,” he said.
Alongside Pradhan, B Ashok, Chairman of Indian Oil Corp, justified the decision not to revise rates saying oil firms were saddled with huge inventory which need to be compensated.
The crude oil that is being processed currently in refineries is one that was bought about 6-8 weeks back when rates were higher than present prices. By the time, it is processed and marketed its market value would have come down, resulting in inventory losses, totalling about Rs12,000 crore, he said.
“There is huge drop in crude prices which is having a tremendous impact on our inventories, its a cash loss. We are paying much higher price for the crude and today we are processing the crude at a much lower price and passing it. We are taking our decision based on that and we think we have been doing the right thing,” Ashok said.