New Delhi: With oil PSUs deciding not to hike petrol and diesel prices ahead of Karnataka elections, IOC Chairman Sanjiv Singh Tuesday said the company has decided to “temporarily moderate” prices to avoid sharp spikes and panic among consumers.
State-owned oil firms have since April 24 not changed petrol and diesel prices despite benchmark international product rates going up by nearly USD 3 per barrel.
Separately, Oil Minister Dharmendra Pradhan said the government has nothing to do with fuel pricing after it deregulated and gave PSUs freedom to fix retail rates.
Singh however indicated that retail prices will rise if the current trend in international oil prices continues. Karnataka goes to polls May 12.
“We have decided to temporarily moderate retail prices by not passing on the required increase as we believe the current international oil product prices are not supported by fundamentals. So we have decided to wait for a while,” Singh told reporters on sidelines of an industry event here.
The freeze in fuel prices follows the finance ministry’s refusal to cut excise duty to give relief to the common man after petrol hit a 55-month high of `74.63 a litre and diesel touched a record high of `65.93.
“We can pass on daily spikes based on the freedom we have to revise prices on a daily basis. But we believe the surge in international oil products market is not supported by fundamentals and passing them on to consumers will unnecessarily create panic,” Singh said. “So we moderate to a certain extent so that peaks are avoided.”
Asked about all the three PSU oil firms fixing retail rates in tandem, he said it was possible that all of them thought that the spike in international oil prices is not supported by fundamentals and needs to be moderated.
Petrol and diesel prices have not changed since April 24. This is despite the benchmark international rate for petrol going up from USD 78.84 per barrel, which was used for raising the price to `74.63 a litre on April 24, to USD 81.61 now, according to sources privy to fuel pricing methodology.
The benchmark international diesel rates during this period have climbed from USD 84.68 per barrel to USD 87.14. Also, the rupee has weakened to `66.62 to a US dollar from `65.41, making imports costlier.
Shubhada Rao, Chief Economist, Yes Bank, said hardening of international crude oil price is likely to manifest itself via higher pressure on India’s twin deficits along with inflation while also having a marginally negative spillover on overall growth momentum.
“A 10 per cent increase in oil price could potentially increase headline CPI inflation by 0.2-0.3 per cent, increase CAD/GDP ratio by 0.3 per cent, and lower overall GDP growth by 0.1 per cent. The final impact on fiscal would depend upon the degree of discretionary fiscal adjustment encompassing both non oil revenue and non oil expenditure,” Rao said.
Pradhan had last month denied reports of a directive to state oil firms to absorb at least Re 1 a litre hike by not raising prices in line with cost.
PTI