Crude costs as much as in ' 08 , petrol 28 % more

Petrol cost Rs
45 .52 a litre in Delhi when the
mix of crude that India buys
averaged a little over $ 92 /
barrel in February 2008 . But
today , the fuel costs Rs 58 . 37 ,
or 28 % more a litre , even though crude costs a
tad more than before at $ 93 a barrel in January .
The reason is that in 2008 , when international
crude price was going through the roof, the
government controlled the pricing of petrol . But
since last June , state - run oil companies are free
to set pump prices in tandem with global crude .
The result has been six price revisions for petrol
in the last six months, while the government has
capped prices of diesel and kitchen fuels much
below their cost of production for fear of stoking
an already- high inflation and public anger .
The government took $ 75 /barrel of Indian mix
as the benchmark when it freed up petrol . That
was the level at which crude appeared steady
and there were expectations that the global
economic slowdown would reduce demand and
maintain the priceline ^ if not pull it down .
But with international crude already back to
nudging the $ 100 - mark , how do things stack up
for consumers in India? While deregulating
petrol prices , the government had explained it
would step in if crude went beyond a point .
That promise was repeated through December
by oil minister Murli Deora. While the
government had not spelt out the threshold,
expectations were that a price range of $ 90 -
$ 100 would trigger government intervention .
On Monday , price of Brent crude inched up to
$ 98 / barrel as measured by futures trade for
March delivery in the London market . It had first
breached the $ 100 / barrel - mark in February
2008 . Though NYMEX ( New York Mercantile
Exchange ) is the bellwether for global oil trade,
Brent is clearly indicating what the future holds .
On Sunday, Iranian oil minister Masoud
Mirkazemi , who is also the present president of
oil- producer cartel Opec, said oil at $ 100 /barrel
was `` appropriate ''. He also said there was no
need to hold an emergency meeting to discuss
raising production to calm prices even if they
rose above $ 120 / barrel .
This means the government will have to rejig
duties if it wants to prevent further increase in
fuel prices . Deora said on Monday he had
sought a meeting with finance minister Pranab
Mukherjee . Last fortnight , Deora said on the
sidelines of an ONGC function in Delhi that the
government would cushion consumers from the
full impact of high oil prices .
But going by indications from Mukherjee and
finance secretary Ashok Chawla in the recent
past, any duty rejig will happen only in the
Budget. On Monday , another indication of that
came from petroleum secretary S Sundareshan ,
who told reporters in Mumbai that his ministry
will `` ask for duty reductions in the Budget'' .
There are enough political and economic
grounds for a duty rejig. The Congress on
Monday asked oil marketing companies to
explain Saturday 's price increase . IndianOil
Corporation, the country 's biggest refiner -
marketer, said in a statement that the
companies were still losing Rs 1 .22 a litre on
petrol as they did not pass on the burden
entirely .
But why were petrol prices revised when
inflation is over 8 %? One, the fuel has less than
one percentage point weightage in the price
index. Two, with this hike , oil companies would
reduce losses on petrol in the month and a half
left for the Budget.
They now have to reckon with Rs 7 .65 a litre
loss on diesel , Rs 366 loss on each cooking gas
cylinder and Rs 19 . 60 a litre on kerosene . The
government has said it will make good part of
these losses and oil producers will chip in with
33 % by way of discount . If crude keeps climbing
till the Budget, the government will rejig duties
and the three oil marketers can still expect to
keep their losses for the fiscal within the
estimated Rs 72 , 000 crore.
Last time Deora discussed the pricing issue with
Mukherjee in December , the oil minister asked
the finance ministry to make up half the losses
of oil marketers . Earlier this month , he again
asked Mukherjee to release Rs 10 ,000 crore as
interim relief so that oil companies do not show
loss in the third quarter . The finance ministry
has already released Rs 13 ,000 crore as subsidy .