Explained: Why are petrol, diesel prices rising and why it may not stop soon

New Delhi, Apr 05: The prices of petrol and diesel have been hiked by at least Rs 9.2 over the past fortnight. According to the experts, the fuel prices were hiked Rs 0.52 to 0.60 for every $1 per barreling the price of crude oil for OMCs to maintain normal marketing margins on the sale of auto fuels.

In November the OMCs halted price revisions for a period of 137 days. Prashant Vasisht, Vice President & Co-Group Head at credit ratings agency ICRA said that for every $1 increase in crude oil price at the current tax rates, the retail price of petrol and diesel should increase by 60 paise.

Why the sudden rise:

The OMCs had held the prices of petrol and diesel for a period of 137 days from November 4 onwards.

This was done after the Centre announced an excise duty cut of Rs 5 per litre on petrol and Rs 10 on diesel.

With the OMC now revising prices, the entire burden is falling on the consumers. Normally the prices of fuel are revised daily which is in line with a 15 day rolling average of benchmark international prices on petroleum products.

Further the Russia-Ukraine conflict and the attacks on oil and gas infrastructure in Saudi Arabia has also led to further concerns about the disruption in crude oil supplies.

LPG hiked:

The OMCs had also hiked the price of LPG by Rs 50 last week. The price of cooking fuel stood at Rs 949 per 14.2 kilogram cylinder in Delhi.

However the prices could go up further as some analysts have said that the OMCs are stick making losses on LPG sales at the current price levels due to high crude oil prices.

What Centre may do:

To take the burden off the people, the Centre may chose to reduce excise duty on both petrol and diesel.

The Central and State taxes currently account for 43 per cent of the retain price of petrol and in the case of diesel it is 37 per cent. When compared to the pre-pandemic levels, the central taxes are higher by Rs 8 per litre on petrol and Rs 6 on diesel despite Rs 5 a litre cut in the excise duty for petrol and Rs 10 for diesel.