Buckling under political pressure, the public sector oil marketing companies (OMCs) reduced petrol prices by Rs 2.02 a litre (at the retail end in Delhi) from midnight Saturday.
The decrease will vary from State-to-State depending on the rates of value-added tax/sales tax. The companies have reduced the base price of the product by Rs 1.68 a litre (excluding VAT/sales tax).
Though this cut may not be very significant compared with the steep hike of Rs 6.28 a litre (excluding VAT/sales tax) last week (May 23/24), this would bring some respite for the ‘common man'.
The politics in petroleum products pricing is evident from the fact that the increase came just a day after the Budget session of Parliament ended, and the cut has come two days after the ‘Bandh' called by the Opposition and other political parties.
All eyes on ministerial panel
However, all eyes are now on the Ministerial panel headed by the Finance Minister, Mr Pranab Mukherjee, which is scheduled to take a call on the prices of other regulated products — diesel, PDS kerosene and domestic LPG. The panel has not met since June 2010, when it had decided to deregulate petrol prices, and in-principle agreed to free diesel pricing.
In a statement, Indian Oil Corporation said that petrol prices are reviewed on a fortnightly basis. “Since the last pricing cycle, though international prices have decreased quite significantly, the dollar-rupee exchange rate has shown further deterioration.”
While the price at which Indian refiners buy their crude has fallen from $113.08 a barrel to $106.68, the international price for petrol has declined from $124.42 barrel to $115.81 a barrel. The exchange rate has deteriorated from Rs 53.17 against the dollar to Rs 54.96.
Mounting Under-recoveries
Last fiscal, petrol prices were revised five times — increased thrice and reduced twice. Since petrol pricing, though deregulated, still continues to be controlled by the Government, the OMCs (Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation) face high levels of under-recoveries on diesel, PDS kerosene, and domestic LPG.
Compared with the last price change (May 23), the current under-recovery on diesel has gone up to Rs 12.53 a litre from Rs 6.13, PDS kerosene to Rs 30.53 a litre from Rs 24.16, and domestic LPG to Rs 396 a cylinder from Rs 331.13.
At these rates, it is estimated that under-recovery on sale of these products during 2012-13 will be around Rs 1,81,000 crore for the three companies.