Petrol prices should have been cut by Rs 2.20-2.30 a litre as global rates have fallen to an 18-month low but oil companies will not reduce prices as they watch the volatile rupee that is making imports costlier.
The rupee depreciating to an all-time low of Rs 57.30 to a US dollar has wiped away most of the gains arising from oil dropping below $90 a barrel for the first time since December 2010.
“The oil companies are fully cognisant of facts. They are watching the volatility (in rupee and global oil prices). Very soon they will take a decision,” Oil Minister, Mr S. Jaipal Reddy, told presspersons here.
The State-owned oil firms, that revise the rates of petrol on the 1st and 16th of every month based on the average imported cost and forex rates of the previous fortnight, skipped changing rates on June 16.
“There is lot of volatility in the prices of crude oil and the value of the rupee. There is double volatility,” Mr Reddy said. “We are relieved at the fact that the price of crude oil has eased.
But this has been upset by a decrease in the value of rupee.
“We are watching the situation with keen interest and we are watching it on a day-to-day basis,” he said, adding that for a nation that is 76 per cent dependent on imports to meet its requirements, the value of the rupee becomes very important.
Officials in his Ministry said the gasoline cracks or the difference between the cost of raw material (crude oil) and the price of product (petrol) had narrowed to just $3 per barrel. In comparison, cracks for diesel were as high as $12-13 a barrel.
With such a narrow spread, any upward movement in crude oil prices or devaluation of the rupee would force an increase in the price in the near future, if the rates were to be cut now.