Domestic fuel prices won’t rise as much as international rates: Oil ministry official

Domestic fuel prices won’t rise as much as international rates: Oil ministry official

New Delhi: Domestic fuel prices will not rise in tandem with international prices as consumers need to be protected, an oil ministry official has said, defending a curb on free pricing. He backed reasonable profit for refiners but warned against ‘profiteering’ by them.

There was no immediate plan to cut duties on fuel as money was needed for welfare measures, he said. It was a matter of ‘worry’ that a leading private refiner was starving its dealers of fuels while exporting big volumes in search of extraordinary profits, he added.

State-run refiners have kept prices of petrol and diesel unchanged for more than a month even though international prices have been elevated and highly volatile. Companies are officially free to charge rates in line with international prices but are selling at rates that are about ₹25-30 per litre lower for diesel and ₹8-10 for petrol.

These are notional losses, and not necessarily cash losses for refiners, the official said, adding that fuel margins have hugely expanded in the international market, especially for diesel where it’s $45-50 per barrel, compared to $10 in normal times. After a brief period of stability, crude prices have spiked again with Brent crossing $115 a barrel. “There is no logic that just because there is a shortage of diesel in Germany, Indian consumers should pay a high price,” the official said.

Refiners must make money but shouldn’t profiteer. “If you are doing profiteering, it’s the job of the sovereign to tax you on profiteering or stop you from profiteering. Why is there an elected government if it can’t stop profiteering?” he said.

Very high prices can affect fuel demand. “If there is no mobility, how will the economy grow?” he asked.

A balanced approach is needed whereby consumer prices remain affordable while refiners also make money. “When a refiner does not make money, it’s not just his problem, it’s everybody’s problem,” he said.

The official ruled out any immediate plan to cut duties on fuels as the funds are needed for welfare measures. “You have to shelter the poor from different hits,” he said. Even if fuel taxes are slashed by ₹6-8 per litre to pre-Covid levels, it wouldn’t make a major difference to consumers as prices are quite high, he said.

He said a private refiner is prioritising the export market over the domestic market, and it’s a matter of worry. “The refiner is starving his own dealers and is destroying his relationship with them,” he said.

India is not facing any fuel shortage, but the share of state-run refiners is going up in the domestic market as the private refiner is chasing the more profitable export market, he said.

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