Why Petrol, Diesel Prices Won’t Fall in India Despite Cheaper Crude Oil?

Even as crude oil prices have fallen significantly following the bank collapses in the US, including Silicon Valley Bank and Signature Bank, the prices of petrol and diesel are unlikely to come down in India. Petrol prices in India have been stagnant since May 2022.

The price of Brent crude oil currently stands at around $72 per barrel, which is significantly lower as compared with about $100 per barrel last year. The fall in oil prices due to the banking sector crisis and worries about possible recession started expectations in the market that the fuel prices in India might reduce on the back of cheaper crude oil now.

According to a CNBC-TV18 report quoting sources, prices of petrol and diesel in India are unlikely to be reduced anytime soon as oil marketing companies (OMCs) have to recover accumulated losses of Rs 18,000 crore due to high crude prices in earlier quarters.

It may take a long time for the oil marketing companies to recoup losses worth over Rs 18,000 crore, dismissing the possibility of a price cut at this stage, according to the report.

Petrol prices in India have been stagnant since May 2022, when Finance Minister Nirmala Sitharaman reduced the prices by Rs 8 per litre for petrol and Rs 6 per litre for diesel by slashing the excise duty.

On March 16, the petroleum ministry had said in Parliament in response to a query, “While the crude oil price (Indian basket) in rupee per barrel terms has increased by 23 per cent from December 2021 to March 2023, increase in retail selling price of petrol and diesel at Delhi has only been 1.08 per cent and 3.40 per cent, respectively.”

It went on to add, :Prices of Petrol and Diesel have not been increased by public sector Oil Marketing Companies (OMCs) since 6th April 2022, despite record high international prices. The three Public Sector OMCs viz. IOCL, BPCL and HPCL have booked a combined loss of Rs 18,622 crore during April 2022 to December 2022.”

Current Petrol, Diesel Prices

The price of petrol in Delhi currently stands at Rs 96.72 per litre, while diesel is retailing at Rs 89.62 per litre. Meanwhile, in Chennai, petrol is being sold at Rs 102.73 per litre, and diesel is priced at Rs 94.33 per litre. Mumbai continues to have the highest price for petrol, trading at Rs 106.31 per litre, with diesel priced at Rs 94.27 per litre. In Kolkata, the cost of petrol remained stagnant at Rs 106.03 per litre, while diesel is being sold for Rs 92.76 per litre.