US crude prices today surged the steepest in 13 years, the Middle-East crudes which India largely buys have followed suit—a 10 per cent hike in the last three months, up to 32.58 a barrel. But when it comes to the price of petrol and diesel here, you can relax—but only for now.
The hike will come as soon as elections are over.
For, violating a Cabinet decision allowing fuel prices to be fixed at parity with global prices, the government has decided to freeze petrol and diesel rates to keep the feel good factor alive.
‘‘If the price were to be revised to factor the crude jump, petrol would go up by more than Rs 4 per litre and diesel by Rs 2 per litre,’’ says an oil company official.
The freeze is costing the oil firms dear. On a monthly consumption of 3.5 million tonnes of diesel and a million tonnes of petrol, the ‘‘Feel Good subsidy’’ works out to more than Rs 2,200 crore in the past two months.
Still, oil companies have been told not to press for a proportionate increase in diesel and petrol prices.
Last month, when the need for a price increase was brought up informally at a Cabinet meeting, the directive was to ‘‘keep all price increase on hold until the elections were over.’’
So forceful was the order that in the past one month, oil firms and the petroleum ministry have even stopped working out the required price changes—an exercise which is done every fortnight.
Price revisions have been avoided since January 16 even though crude oil price has jumped by more than 3 a barrel to 32.58 since the last price hike on December 31.
The price rigidity is also helping the Feel Good factor by keeping inflation in check. Other than the direct impact on the wholesale price index, a rise in prices has a cascading effect on those of other commodities because of their use as transport fuel and as feedstock for other products.
Prices were also kept on hold ahead of the recent assembly polls in four states. Once that got over, prices were raised by Rs 2 per litre to compensate the oil firms of their past losses.
But this time, the wait is going to be until May 10 when the last phase of elections get over. Be prepared.
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