Every Rs 1 fall in its exchange rate against dollar will add another 65 paisa to pump prices of auto fuels.
New Delhi: Brace yourself to pay Rs 100 for a litre of petrol in the New Year. Officials in public sector oil marketing companies said in the absence of any intervention to tame prices, petrol could cross Rs 100 per litre mark in most parts of the country by January 2019.
The prediction is based on simple calculation of roughly 40-50 paisa per litre increase in retail prices of petrol and diesel for every one dollar increase in international crude oil prices. And to top it, if rupee depreciates further, every Re 1 fall in its exchange rate against the dollar will add another 65 paisa to pump prices of auto fuels.
With global analysts and reports of major oil trading houses now suggesting that international oil prices may breach $100 mark by the end of the year or early next year, retail prices of petrol and diesel have no way but to move further northwards. The pressure will also come from rupee that has remained weak despite government steps.
“The US sanctions on Iran and its intent to strictly enforce the restrictions will suck out almost 1.5-2 million barrels of oil a day from the market. There is no supply response at present to suggest that this big gap can be filled quickly. This could push up oil prices in the fourth quarter to over $100 a barrel,” said an oil sector analyst who did not wish to be quoted on projections.
Global crude oil prices have breached $ 81 a barrel mark, and there are no signs that prices will abate any soon. The price of Indian basket of crude is also not far behind hovering around $78 a barrel mark. Crude prices are over 35 per cent higher now than on August 1.
Petrol is being retailed Rs 82.86 a litre and diesel Rs 74.12 a litre in Delhi on Wednesday, is already at record high levels. But the petrol prices has already reached Rs 90.22 a litre in Mumbai and the city could be the first to taste Rs 100 a litre price early next year. Chennai is also not far behind and petrol is being retailed there at Rs 86.13 a litre now. Maharashtra has the highest incidence of VAT that probably explains while fuel prices there is highest in the country.
Interestingly, the fuel station of public sector oil retailers have already started the process of calibrating their dispensing machines to take care of three digit petrol prices. There is sense with pump owners that Rs 100 petrol may soon be a reality. They are not leaving diesel as well where also three-digit machine calibration is being done.
“It is still not too late and government can save the consumers by reducing excise and VAT. But it is more concerned about maintaining its revenues and controling deficit,” said a fuel station staff.
The Centre increased excise duty on petrol and diesel on nine occasions between November 2014 and January 2016 that has more than doubled its excise collections. But it has provided relief only once last year when it cut excise rates by Rs 2 per litre for both the products.
The situation with VAT duty levied by states is worse at it is applied on value of the product (ad valorem rate) and is not a fixed rate as excise duty. This means that with increase in price of petrol and diesel, their tax collection also shoots up. Only a few states such as West Bengal, Andhra Pradesh, Rajasthan have marginally cut VAT rates of oil prices.