NEW DELHI: Fuel prices are likely to be raised further as the gap between domestic pump prices and international benchmarks are yet to be closed but high taxes are pushing rates to record levels, Sanjiv Singh, chairman of India’s largest refiner-retailer, IndianOil, said on Wednesday.
Singh’s comment came on the day diesel, at Rs 79.88 a litre, became costlier than petrol by 12 paise Delhi after the retailers raised its price for the 18th consecutive. Petrol price was left alone after increasing it for 17 days. This is the first time-ever that diesel, consumed by transporters and farmers, has overtaken petrol anywhere in India.
“The Delhi government had increased VAT on petrol from 27% to 30% and that on diesel from 16.75% to 30% on May 5. This massive hike in VAT resulted in rates going up by Rs 1.67 per litre for petrol and by a record Rs 7.10 for diesel on a single day,” Singh said in reference to how high taxes amplify the impact of revisions in base prices.
Singh said the companies resumed daily price revisions after international markets stabilised. This included passing on the excise duty increase. “While we had negative cracks (margins or difference between crude and refined product prices), individual states raised VAT and central excise was also hiked.” he said. The Centre on March 14 hiked excise duty on petrol and diesel by Rs 3 per litre each. Again on May 5, the duty was hiked by a record Rs 10 per litre on petrol and Rs 13 on diesel.
“Today nearly 70% of the fuel prices are taxes and other charges such as transportation that are more or less fixed. We deal with only 30% (base price) that is benchmarked to international rates. With demand coming back and crude rising, cracks are also rising. So even if oil prices are to stabilise, it is quite likely that (fuel) prices may still rise,” he said.
Singh pointed out how diesel in all other cities is still priced lower than petrol — the difference between the two being the highest at Rs 9.50 per litre in Pune and Rs 3.50 in most states.