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Oil minister Dharmendra Pradhan rules out intervention on daily fuel price revision

He however remained non-committal on cutting taxes to soften the blow of relentless rise in prices since July 3, the government need to finance huge infrastructure.

ET Bureau|
Updated: Sep 14, 2017, 12.23 AM IST
The drop in prices for over a fortnight after the daily price revision was introduced on June 16 has been ignored and only "temporary" phenomenon of rising trend is being highlighted.
NEW DELHI: The government doesn’t plan to intervene to check fuel prices that have soared to the highest in three years, oil minister Dharmendra Pradhan said after shares of oil refiners tumbled on speculation that refining and marketing firms would have to sacrifice margins to cushion consumers. Pradhan remained non-committal on cutting excise duty to check price rise.

“It’s up to the finance ministry,” he said. While defending the higher duty, Pradhan said increased revenue was only going into welfare activities of building more roads, and providing irrigation and drinking water facilities. He said oil companies will continue to have pricing freedom. “Government has no business interfering in the day-to-day affairs of the companies,” Pradhan said on Wednesday after meeting top executives of state oil firms.

Stocks of Indian Oil, HPCL and BPCL fell 5-6% on price control concerns. Local prices of petrol and diesel are linked to global rates and two hurricanes that hit US recently and affected about 13% of the world’s refining capacity have caused a temporary price surge which would ease soon, Pradhan said.

The disruption in US refineries made crude oil cheaper but raised the rates of petrol and diesel, bringing a windfall for Indian refiners. A person with knowledge of the meeting between executives and the minister, however, said the companies have been asked to be ‘sensitive’ to the impact prices have on consumers.

While crude oil prices have halved in the past three years, consumer prices of petrol and diesel have changed little because the government increased taxes on petrol by 64% and diesel by 137% after oil tumbled. Oil prices began collapsing in June 2014, but the effect on local prices was very limited as the government kept raising duties. Oil companies and petrol pump dealers also gained with higher margins.

In May 2014, one in three rupees paid for petrol went in taxes and dealer commission while in July 2017 taxes and dealer commission comprised 58%. For diesel, half the money went in as tax and dealer commission in July this year compared to one fifth in May 2014. Petrol pump dealer commission has risen 60% in the same period.

The combined profit of fuel retailers IOC, HPCL and BPCL rose 160% in 2016-17 when average crude price was $47.5 a barrel from 2013-14 when crude averaged $105.5/barrel. Total fuel subsidy burden on government and companies has declined 86% in three years to Rs 19,700 crore in 2016-17.

Petroleum sector’s contribution to central and state government has doubled in three years to Rs 5.24 lakh crore in 2016-17.

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