The sharp surge in the prices of petrol and diesel since June 16,2017 when the “dynamic” daily pricing model for these fuels was introduced, has triggered some uproar, forcing union Petroleum Minister Dharmendra Pradhan to explain on Wednesday Sep 13,2017.
While Pradhan maintained that the government does not plan to intervene to control prices, which have reached their highest in nearly three years, he remained non-committal on effecting a cut in excise duties — asserting this was “up to the Finance Ministry”.
What has been the trend in fuel prices?
On March 1, 2014, a couple of months before the NDA government came to power, the Brent crude price was $ 108.6 per barrel, and petrol cost Rs 73.16 a litre in Delhi. On September 11, 2017, Brent crude was trading at $ 54.2 per barrel — but the price of petrol in Delhi was nearly the same as 42 months ago, at Rs 70.30 per litre.
The exchange rate impact has been largely neutral during this period — the rupee was trading at 61.76 against the US dollar on March 1, 2014; it was 63.90 on September 11, 2017
The dynamic daily pricing model has come in for flak because, ever since it was implemented, the price of petrol has gone up from Rs 63.09 in July (weighted monthly average of petrol retailed by Indian Oil Corporation in Delhi) to Rs 70.39 on September 14 — an increase of 11.6%.
Diesel prices have surged similarly, and the trend has been identical in other cities. During this period, however, the so-called Indian basket of crude has gone up 12.5 per cent.
So, how is the Indian crude basket calculated?
The Indian basket of crude oil represents a derived basket comprising Sour Grade (Oman and Dubai average) and Sweet Grade (Brent Dated) of crude oil processed in Indian refineries (in the ratio of 71.03:28.97). Prices of petrol and diesel have been made market-determined effective June 26, 2010 and October 19, 2014, respectively. Since then, the Public Sector Oil Marketing Companies (OMCs) are supposed to take appropriate decisions on the pricing of petrol and diesel, in line with international product prices and other market conditions such as exchange rate and the demand-supply situation, among others. On June 16, 2017, the dynamic daily pricing was introduced
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