Karnataka Elections: fuel prize frozen by oil companies

With just 10 days left for the Karnataka Assembly elections, the land is in a state of frenzy, with the leaders in the state, the police looking for unaccounted cash and keeping a close watch on the communally sensitive areas.

A fortnight before Karnataka goes to polls, PSU oil firms have stopped revising petrol and diesel prices even though benchmark international rates have gone up by almost $2 per barrel.

With finance ministry refusing to cut excise duty to give relief to the common man from petrol hitting a 55-month high of Rs 74.63 a liter and diesel at a record high of Rs 65.93, oil PSUs have since April 24 not changed fuel rates.

Daily price notification issued by oil firms showed static petrol and diesel price since April 24.

READ ALSO: Today’s petrol and diesel prices reached new heights

This is despite the benchmark international rate for petrol going up from $78.84 per barrel, which was used for raising the price to Rs 74.63 a liter on April 24, to $80.56 now, according to sources privy to fuel pricing methodology.

The benchmark international diesel rates during this period have climbed from $84.68 per barrel to $86.35. Also, the rupee has weakened to Rs 66.14 to a US dollar from Rs 65.41, making imports costlier.

Oil PSU executives refused to discuss pricing saying they have been asked not to speak on the issue.

“We have been told not to discuss pricing,” said a top official at one of the three state-owned oil marketing firm said. “You can neither quote me or my company on this,” he said.

Oil ministry officials said they don’t have anything to do with pricing and it’s up to the companies how they price fuel.

Karnataka goes to polls on May 12.

READ ALSO: Govt asks Oil Companies not to raise petrol, diesel prices

Oil Minister Dharmendra Pradhan had last month denied reports of a directive to state oil firms to absorb at least Re 1 a liter of the hike by not raising prices in line with cost.

The prices at petrol pumps of state-owned fuel retailers like Indian Oil Corp (IOC) were cut by 1-3 paisa every day in the first fortnight of December 2017 before Gujarat went to polls.

They started moving up immediately after polling for assembly elections in Gujarat concluded on December 14, leading to speculation that government may have asked oil companies to hold on to the prices.

State-owned oil companies in June last year dumped the 15-year old practice of revising rates on 1st and 16th of every month and instead adopted a dynamic daily price revision to instantly reflect changes in cost.

If this practice was followed in letter and spirit petrol and diesel prices should have been increased by 50-60 paisa a liter in last one week, an analyst tracking the sector said.

READ ALSO: Diesel price strikes an all-time high in the nation

The government had in June 2010 freed petrol price from its control and the diesel rates were deregulated in October 2014. Prices have since then moved more or less in tandem with international rates barring a few exceptions like the period before a crucial election.

Finance Secretary Hasmukh Adhia had last month and Economic Affairs Secretary Subhash Garg had last week ruled out any immediate reduction in excise duty to cushion the increases warranted from the spike in international oil price.

The BJP-led government had raised excise duty nine times between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a liter.

The government had between November 2014 and January 2016 raised excise duty on petrol by Rs 11.77 a liter and that on diesel by Rs 13.47 per liter to take away gains arising from plummeting global oil prices. This led to its excise mop up more than doubling to Rs 2,42,000 crore in 2016-17 from Rs 99,000 crore in 2014-15.

The central government had cut excise duty by Rs 2 per liter in October 2017, when petrol price reached Rs 70.88 per liter in Delhi and diesel Rs 59.14. Because of the reduction in excise duty, diesel prices had on October 4, 2017, come down to Rs 56.89 per liter and petrol to Rs 68.38 per liter.

However, a global rally in crude prices pushed domestic fuel prices far higher than those levels.