The continued softness in global crude prices and the relative stability in the rupee-dollar exchange rate means oil in India now costs less than a bottle of mineral water. However, the drop in domestic petrol and diesel prices has not kept pace with global prices because the government has repeatedly hiked excise duty on petrol and diesel to increase its revenues. Earlier this month, excise duty on petrol and diesel was hiked for the third time in the current fiscal year.
The government last week said that the price of Indian crude basket has fallen to $29.24 per barrel or Rs 1,956.45 per barrel at Rs 66.91 per dollar as on January 7, 2016. An oil barrel is 159 litres, so the price of one litre of crude oil comes to Rs 12 per litre, which is 20 per cent lower than a litre of mineral water priced at Rs 15.
The current situation aptly sums up the spectacular drop in global crude oil prices. Oil prices have already fallen over 70 per cent since the downturn began in mid-2014. Goldman Sachs says oil could hit $20 a barrel.
The crash in global crude prices has however moderately benefitted Indian consumers as pump prices have fallen by just 20 per cent as compared to the 70 per cent drop in global prices.
Basic excise duty on petrol has gone up by Rs 7.73 per litre in fiscal year 2015-16 while on diesel it has risen to Rs 7.83 per litre. The government had in four instalments raised excise duty on petrol and diesel between November 2014 and January 2015 to lessen the reduction in retail rates, which followed falling international oil rates.
If the government would not have raised these duties, consumer price of petrol and diesel should have been lower by Rs 10.02 a litre and Rs 9.97 per litre, respectively.
Petrol currently costs Rs 59.35 per litre in Delhi while diesel is priced at Rs 45 a litre.