The 58-day long pause in petrol price revision and the 48-day status quo on diesel rates were preceded by no change in rates between June 30 and August 15 and 85-day status quo between March 17 and June 6. Public sector oil marketing companies – Indian Oil Corporation, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd – revise rates of petrol and diesel daily according to benchmark international oil price and foreign exchange rate.
However, they have resorted to calibrating the rates since the pandemic broke out in order to avoid volatility and the resulting uncertainty in retail prices.
Rates vary from state to state depending on the incidence of local sales tax or VAT. The surge in petrol and diesel prices was expected as the global oil market has shown signs of recovery after positive news on the successful release of a coronavirus vaccine soon.
Moreover, the demand for oil and falling inventory levels in major consuming markets has also provided an impetus to the rising crude price.
Holding the retail price revision constant for almost two months was praiseworthy, especially at a time when globally prices change by the hour, in India it could be kept static for such a long period.
Every dollar rise in the price of crude leads to an increase of up to 40 paise per litre in the retail price of petrol and diesel. This would mean that the fuel prices should be up by at least Rs 1.20 per litre by now.
However, oil companies have kept fuel prices static even when there was a need to revise it downwards last month. Saving has discouraged OMCs from hiking petrol and diesel prices by a higher margin and now that the option is exhausted, regular price revision could commence soon.