Market prices of petrol surged to new reputed high on Thursday 4th February 2021 in the national capital of Delhi with oil marketing companies (OMCs) increasing pump prices by 35 paise a litre to ₹86.65. Diesel prices were also up 35 paise a litre, going for ₹76.83 a litre in Delhi.
Rates had been stable for 29 days when OMCs began raising auto fuel prices in the beginning of January. Petrol and diesel retailed at a high in Mumbai too, at ₹93.20 a litre and ₹83.67 a litre respectively. Diesel had touched an all-time high of ₹81.94 a litre on 30th July in Delhi.
The cost of the Indian section of crude, which comprises Oman, Dubai and Brent crude, was at $55.18 a barrel on 1st February. Following the outbreak of the COVID-19 pandemic, crude prices had steeped down to $19.90 in April before recovering to $49.84 a barrel in December according to data from the Petroleum Planning and Analysis Cell. It averaged at $56.43, $69.88 and $60.47 per barrel in FY18, FY19 and FY20, respectively.
The benchmark Brent crude traded at $58.62 per barrel in Asian deals on 4th February, while the West Texas Intermediate was at $55.92 a barrel.
Oil prices have been on a rise after the Organization of the Petroleum Exporting Countries (OPEC)-plus meeting on 3rd February said that they would continue with output curbs. The OPEC-plus decision is important for India as production from the cartel makes up for about 40% of global output and 83% of India’s oil imports.
“The Committee noted that since the April 2020 Ministerial Meeting, OPEC and non-OPEC countries have adjusted oil production down by a cumulative 2.1 billion barrels, stabilizing the oil market and accelerating the rebalancing process,” OPEC said in a statement on 2nd February.
This move comes surrounding the circumstances of the Indian government showcasing a V-shaped economic recovery. The union budget presented on 1st February caustiously assumes a nominal GDP growth of 14.4%. The International Monetary Fund (IMF) has also upgraded its gross domestic product (GDP) projection for India to a contraction of 8% in FY21 from an earlier estimate of minus 10.3%, saying there are promising indications of economic recovery in high frequency indicators.
The OPEC statement added, “The Committee observed that, while economic prospects and oil demand would remain uncertain in the coming months, the gradual rollout of vaccines around the world is a positive factor for the rest of the year, boosting the global economy and oil demand.”
The union government did not listen to the calls to lower taxes on transportation fuels in the Union budget and introduced a new agriculture infrastructure development cess (AIDC) on petrol, diesel and many other imported items. The new cess will not place any extra burden on consumers although states are may lose some revenue. The cess was imposed with immediate effect on petrol ( ₹2.5 per litre), diesel ( ₹4 per litre) and 12 other agricultural and non-agricultural commodities. In addition to this, the budget reduced basic customs duty and excise and special excise duties on these items.
In 2020-21, India which is the third-largest oil importer globally, had increased taxes on petrol and diesel by ₹13 and ₹16, respectively, in two portions, through a special additional excise duty, apart from road and infrastructure cess. Central and state taxes, and dealers’ commission, are added to the refinery gate price of auto fuels to arrive at the retail price.
India has incurred an expenditure of $101.4 billion on crude oil imports in 2019-20 and $111.9 billion in 2018-19. It is a primary refining hub in Asia, with an installed capacity of more than 249.36 million tonnes per annum (mtpa). It has 23 refineries and wants to to increase its refining capacity to 400 mtpa by 2025.