Petrol prices in the national capital crossed the Rs 100 per litre mark on Monday, as state-owned oil companies implemented the fourth increase in retail fuel rates in 11 days. The price of petrol was raised by Rs 2.61 to Rs 102.12 per litre, while diesel saw an increase of Rs 2.71 to Rs 95.20 per litre. This move is aimed at reducing losses from selling auto fuels below market cost.
Historical context
The last time petrol prices exceeded Rs 100 per litre in Delhi was in October 2021, when they breached Rs 106. The cumulative increase in petrol and diesel prices in the capital now stands at Rs 7.35 and Rs 7.53 per litre, respectively.
Government response
The government stated that the cumulative under-recoveries on petrol, diesel, and LPG have now fallen to slightly below Rs 600 crore per day, suggesting that further price hikes may be on the horizon. After the initial Rs 3 per litre increase on May 15, triggered by the geopolitical situation that disrupted energy supplies and caused a global surge in crude prices, the government had indicated that under-recoveries had decreased by 25% to Rs 750 crore per day.
Ministerial defense
Union Finance Minister Nirmala Sitharaman, speaking in Mumbai, defended the price increases, describing them as market-driven revisions by oil marketing companies in response to soaring global crude prices. She noted that the government had shielded consumers for approximately 75 days by reducing excise duty by Rs 10 per litre, which amounts to an annual saving of over Rs 1 lakh crore for consumers.
Price variations across states
Fuel prices vary across cities due to differing value-added tax structures. In Mumbai, petrol now costs Rs 111.21 per litre, while diesel is priced at Rs 97.83. Chennai residents pay Rs 107.77 for petrol and Rs 99.55 for diesel, while in Kolkata, petrol is Rs 113.51 per litre and diesel Rs 99.82.
Impact of global crude prices
Sujata Sharma, Joint Secretary in the Petroleum Ministry, explained that rising global crude prices have affected all countries, but the impact on India has been comparatively lower because the government and oil companies are absorbing some of the losses. She stated, "Globally, the increase in petrol prices is 22% and diesel 27%, but in India it is much lower — 7.7% on petrol and 8.6% on diesel."
Sharma further elaborated that before the price increases, the government had taken all possible measures, including reducing excise duty on petrol and diesel by Rs 10, which costs the exchequer Rs 14,000 crore annually. Since 2021, excise duty has been reduced by Rs 21 on petrol and Rs 24 on diesel. Despite these steps, oil marketing companies were losing Rs 1,000 crore per day, which has now decreased to under Rs 600 crore after the recent hikes.
Financial justification
Justifying the increases, Sharma noted that the profits earned by the three state-run oil marketing companies in the last financial year would be erased by the losses incurred in just one quarter of the current fiscal year.
