The government of India seems to have finally taken cognisance of the soaring fuel prices across the country. Petroleum and oil minister, Dharmendra Pradhan, convened a meeting with the top ministry bureaucrats and senior executives of state-owned oil companies to discuss the strategy for reduction in retail fuel prices, especially with just about a year to go for the Lok Sabha elections.
It is said that oil producers ONGC and Oil India Limited will subsidise crude oil prices for refiners/retailers in order to rein the retail fuel prices. When the crude oil prices across the globe plummeted, the government increased excise duties and cesses on oil retail to generate additional funds for state-expenditure. With the government unwilling to forgo the excise revenues, the onus is on ONGC and OIL to bear the subsidy burden.
ONGC and OIL were able to recover a good part of their losses from earlier subsidies when the crude prices hovered at their lowest for the better part of the past three years. But with major capital expenditures lined-up for the current fiscal, the state-run enterprises aren’t entirely willing to take the hit.
On the international level, while there is news of the OPEC, Russia and America ramping up oil production, expert analysts do not expect the prices to drop drastically. The earlier estimates of $60-odd per barrel price range has been corrected to an average of about $71 for 2018, which means, the international crude prices will roughly hover around current levels.
With the government wanting to bring a visible cut in prices, it either has to be ONGC or OIL taking the hit. According to reports, for every rupee cut in central excise duty, the loss to the government exchequer is close to Rs 13,000 crores.
