New Delhi, Feb 25 (Agency) Amid surge in global crude prices on Russia-Ukraine crisis, research and rating firm ICRA on Friday said that rollback in excise on petrol and diesel by the government to pre-pandemic levels can prevent jump in pump prices at a cost of Rs 90,000 crore to the exchequer. There is growing apprehension that retail prices of the two key auto fuels will rise following state elections. Oil marketing companies (OMCs) have not raised prices since November, 2021 after central government on the eve of Diwali cut excise duties on petrol by Rs 5 a litre and on diesel by Rs 10 a litre offering relief to the common man. The global crude prices have been on the rise and have now crossed $100 per barrel. The monthly average retail selling prices of petrol and diesel have been unchanged at Rs 102.9 a litre and Rs 90.5 a litre respectively in February 2022 (till Feb 24) for the third consecutive month despite the recent rise in crude oil prices. “In our assessment, a rollback in excise duties to pre-pandemic levels can prevent any major jump in pump prices, thereby softening the impact on the CPI inflation trajectory, albeit at a fiscal cost of Rs. 0.9 trillion (Rs 90,000 crore) to the GoI (Government of India),” ICRA said in a report. It said that after the partial cut in November 2021, central excise rates on petrol and diesel stand at Rs 27.9 a litre and Rs 21.8 a litre, respectively, higher than pre-pandemic period of July 2019-Mar 2020 by Rs 8 a litre and Rs 6 a litre, respectively.
ICRA said that while it is difficult to pinpoint the exact amount of lagged revision in retail prices of petrol and diesel that is warranted by the surge in crude oil prices to the current levels, the increase is estimated to be in a range of Rs 6-8 a litre, similar to the cushion offered by potential excise reversion to pre-Covid rates. The international crude oil price, in Indian basket terms, surpassed the $100 a barrel-mark on February 24, 2022 for the first time since September 4, 2014, fueled by intensifying geopolitical tensions between Russia (world’s third largest oil producer) and Ukraine, as well as global demand outweighing the current supply. The price of the Indian crude oil basket has averaged $93.1 a barrel so far in February 2022 (Feb 1-24), a 10.5 per cent surge relative to $84.2 a barrel in Jan 2022. “We expect the price of the Indian basket of crude oil to remain volatile in the near term, until the geo-political tensions ease or OPEC decides to materially raise the magnitude of production,” ICRA said.