The government cannot change fuel prices on a knee-jerk basis, petroleum minister Dharmendra Pradhan said on Wednesday as stocks of state-run oil marketing companies (OMCs) tanked by as much as eight per cent following recent hikes in transport fuel prices.
Under the daily revision of fuel prices, petrol in Mumbai on Monday cost Rs 79.41 a litre, breaching the level it last touched in August 2014. Petrol per litre on that day cost Rs 70.30 in Delhi, Rs 73.05 in Kolkata and Rs 72.87 in Chennai.
Petroleum products do not come under the Goods and Services Tax (GST) and prices vary at locations according to state taxes.
“GST is the only way to have a rational price mechanism for petroleum products…the industry has been demanding it and finance minister Arun Jaitley (who heads the GST Council) is very interested to have it,” Pradhan said, pointing to the substantial difference in prices between Delhi and Mumbai, for instance, on account of local taxes.
He said the international prices of petrol and diesel have recently gone up by 18% and 20%, respectively. Pradhan noted that global crude oil prices had recently gone up as much as 15% owing to production being hit in the US owing to the impact of multiple hurricanes.
“The government will not interfere in the day-to-day functioning of the OMCs… for the last three years, the pricing mechanism has been linked to the market,” he said.
The petroleum minister said that while hurricanes Irma and Harvey had hit refinery production in Texas, USA, by as much as 13%, he expected global crude prices to ease in the near future.
The Indian basket of imported crude oils gained nearly $3.50 a barrel during last week even as petrol prices in the country touched their highest levels since Prime Minister Narendra Modi assumed office three years ago, official data showed on Monday.
The Indian basket, comprising 73% sour-grade Dubai and Oman crudes, and the balance in sweet-grade Brent, closed trade on the weekend on Friday at $53.63 per barrel. The oil basket had gained over a dollar at the start of last week on Monday to close at $51.34 for a barrel of 159 litres.
Pradhan also said that the decision on reducing the cess on petroleum products rests with the finance ministry, adding that this revenue, however, allowed the government to increase social sector spending.
With crude oil prices plunging last year, the government levied cess on petrol in order to mop up extra revenue for the exchequer.