NEW DELHI: Relief is around the corner for fuel consumers. Pump prices are likely to come down by up to Rs 2 a litre in the next few days, provided crude maintains the current downward trajectory and the rupee does not lose ground against the dollar.
The ground is getting ready as India’s crude cost has dropped below $64 per barrel from more than $68 a fortnight ago, marking a decline of 5%. This is in line with global benchmark Brent declining 10% during this period, cracking $70 per barrel on March 8.
On Tuesday, prices dipped by more than 4% to $61.93 a barrel as a resurgence of Covid-19 cases in many countries – including India, the world’s third-largest oil consumer – and lockdown in Europe dashed hopes of early demand recovery.
Oil refiners and retailers base their pump prices on a 15-day rolling average price of products and the rupee-dollar exchange rate.
Sources said oil companies have been losing Rs 4 on a litre of petrol and Rs 2 on diesel due to the freeze on price revision since February 28, while crude prices continued to rise till March 8. At current pump prices, the refiner-retailers expect to break even at $62 per barrel of oil.
Petrol price had topped Rs 100 per litre in several cities and towns on February 17 as high taxes amped up the impact of rising crude. They would have hit a century in many other cities, including the financial capital Mumbai, if retailers had continued to revise prices. Central excise duty and VAT levied by states together make up more than two-thirds of retail prices.
The Centre had last year alone raised excise duty on petrol cumulatively by Rs 13 per litre and diesel by Rs 16 in two tranches on March 16 and May 5 to tap the benefit resulting from crude prices collapsing to $20/barrel as demand evaporated due to the Covid-19 pandemic.
The upward revision in Central taxes pushed up excise duty mop-up by 48% in the April-November 2020 period to Rs 1,96,342 crore against Rs 1,32,899 crore in the previous corresponding period, while collections under other heads lagged due to the pandemic.