June 01, 2023

Government Is Unlikely To Lower Fuel Prices

By A Special Correspondent
First publised on 2021-06-28 08:11:23

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The price of petrol and diesel was increased by 35 pasie and 25 paise respectively on Sunday. With this, fuel prices have been raised 31 times since May 4. During this period, petrol has become costlier by Rs 8.06 per litre and diesel by Rs 8.17 per litre.

After the Sunday revision, petrol is selling at Rs 98.46 and diesel at Rs. 88.90 in Delhi. In Mumbai, petrol is Rs 104.56 and diesel Rs 96.42. Several other cities and towns have also seen petrol rates cross the Rs. 100 mark.

Will this upward trend continue and will both petrol and diesel continue to sell at close to or over Rs100 from now on?

A note issued by ICRA, prepared by its chief economist Aditi Nayar, has worked out that there is enough scope for the government to reduce the prices by up to Rs. 4.50 per litre and still generate revenue at last year’s level.

Working on a model of increased demand in the current year and a freeze on further taxes, the note says that petrol consumption is expected to grow at 14% and diesel at 10% in 2021-22 on the low base of 2020-21. The increased sales will mean that the government will rake in Rs 360000 crore this year compared to Rs 320000 crore it got last year. If the government is willing to forego this additional Rs 40000 it is expected to earn, it can reduce the price of fuel by Rs 4.50.

While this is a good analysis, it has been seen that the government is financing a major part of its additional expenditure due to the pandemic through increased revenue from fuel. Hence, although it should, it is not going to cut fuel prices and consumers will continue to have to pay close to Rs100 or more for both petrol and diesel for some time now.