Global benchmark Brent crude settled at $98/barrel after slipping to $97.44 as a massive outbreak of Covid-19 in China gave rise to worries over demand destruction and Moscow’s support for early resumption of nuclear talks with Iran eased supply concerns.
A decline in oil prices will reduce the pain for fuel retailers by reducing their under-recovery on petrol and diesel, which had risen to about Rs 20 or so as Brent hit $139/barrel on March 7.
The ‘Indian Basket’, or the mix of crude bought by Indian refiners, slipped to $110.3 on Monday from a high of $128.24 on March 9.
The basket is expected to slide further in the coming days since it lags Brent by a few days. The price difference with Brent varies, usually within $2-5/barrel, but could widen in case of a surge.
This should bring down under-recoveries to a level the retailers can bear for the remaining days of the financial year and ease the pressure on the government for another round of tax cut, which would have affected its 2022-23 math.
Petrol and diesel prices have not been revised since November 4, when the Centre cut excise duty on petrol and diesel by Rs 5 and Rs 10 a litre, respectively, when crude was at $83/barrel.
On Monday, oil minister Hardeep Puri had referred to the November 4 excise cut and assured the Rajya Sabha that the government would do all that is needed to cushion consumers from a fuel price shock in the coming days.
On Tuesday, minister of state for finance Pankaj Chaudhary reiterated this by telling the House the government would make ‘calibrated interventions’ to keep fuel prices under control to safeguard the interest of the common man.
He said the government is keeping a close watch on factors that decide fuel prices and would make calibrated interventions as and when required to safeguard the interests of the common man.
He pointed out that the ‘crude petroleum and natural gas, fuel & power’ subgroup in the wholesale price index (WPI) is directly related to the fluctuations in the prices of crude oil.