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Over the last fortnight, oil prices have increased by about $3 per barrel, which should logically have pushed the petrol prices at around Rs 2/litre
Taking no chances in the run-up to the crucial assembly polls in Uttar Pradesh early next year, the Centre has given a “verbal nudge” to state-run fuel retailers to hold back upward revision in petrol and diesel prices, The Times of India has reported.
Fuel retailers are losing money as they have not increased pump prices on verbal ‘nudge’ from the oil ministry “which appears to be avoiding giving opposition a political stick in the run up to the crucial UP assembly election,” the report states.
Retailers incur losses
Retailers are losing nearly 24 paise on each litre of petrol and 65 paise on each litre of diesel. Since July 17 the retailers have been reportedly on a ‘wait-and-watch’ mode following ‘suggestions’ from the oil ministry, the news report said.
While fuel retailers are technically free to decide fuel prices, it is the oil ministry, as the owner of the state-run companies which dominate almost 90% of India’s fuel market, which practically decides the prices.
Consumers, however, have gained from fall in global crude oil prices as retailers have passed on the benefit. For instance, the prices of petrol were dropped by 65 paise per litre and of diesel by Rs 1.05, between August 18 and September 5. However, they are now running into losses with the price of crude oil rising since August 20. On Tuesday the benchmark Brent shot up to $75 per barrel.
Rising crude oil prices
Over the last fortnight, oil prices have increased by about $3 per barrel, which should logically have pushed the prices at around Rs 2 per litre of petrol and 70 paise per litre of diesel.
With there being no indication of global crude oil prices falling, the retailers are expecting their under-recoveries to increase if the oil ministry doesn’t approve a hike in the prices within the next four to five months.
The case of UP’s fuel retailers is a bit like that of their colleagues in West Bengal, which saw a 20-day pause in price revisions before the state went to polls earlier this year in March.