A rebound in crude oil combined with taxes that are more than base price means gasoline and diesel have been the most expensive in over two years.
After a two-month hiatus, oil traders began rising prices on November 20. It happened when the price of crude oil surged above $ 50 a barrel and was up 19% in the past 1 months.
However, 30-40% of the retail price is linked to the reference value Brent crude oil. The bulk of consumer payments at the gas station include central and state taxes and other fees.
For example, gasoline and diesel in Delhi cost Rs 83.71 and Rs 73.87 per liter respectively on December 14, 2020. This is the highest since September 2018. The respective prices on December 1st, the latest data for which the separation is available, was Rs 82.34 and Rs 72.42 per liter.
According to the information on the Indian Oil Corp. Available apportionment, taxes add more than 63% to gasoline and 58.6% to diesel retail price.
High taxes prevented retail prices from falling as much as crude oil prices, even though prices in India are market-tied. Brent fell to $ 19 a barrel in April from $ 66 at the start of 2020 as the Covid-19 lockdown sparked economic uncertainty and plummeted demand. Instead of passing the benefits on to consumers, in May the government raised the central excise tax on gasoline and diesel twice – 10 rupees and 13 rupees per liter.
The surge helped the government’s excise tax revenues soar to 1.61 billion rupees between April and October 2020, up 40.9% year over year, according to the Controller General of Accounts. At that point, state tax revenues fell as the economy contracted. Central taxes are higher than the base price of crude oil on December 1st.
Oil traders face profit
For oil marketers, the rebound in Brent crude in the third quarter is likely to result in inventory gains by selling inventories bought at a lower price at a higher market price. Further price increases are needed to maintain net marketing margins and offset the weak gross refining margin, according to a report by ICICI Securities. The broker estimates third quarter inventory profit at Rs 450-880.