In a bid to provide much-needed relief to the inflation-hit citizens, the caretaker government of the country took its first significant step by reducing the prices of petroleum products. This reduction, albeit a welcome move, did not fully deliver the expected relief due to a subsequent increase in margins for oil companies and dealers.
Government’s initial action to alleviate the economic burden on its citizens was a price reduction of up to Rs11 per litre on petroleum products. This reduction came as a breath of fresh air for the consumers, as it was the first major decrease in two months. The move was attributed to the strengthening of the national currency, the rupee, which allowed for a more favorable pricing structure.
New Prices Implemented
The revised prices, effective from Sunday, witnessed a significant cut in the price of petrol, reduced by Rs8, bringing it down from Rs331.38 per litre to Rs323.38. High-speed diesel (HSD) experienced an even more substantial reduction of Rs11, with its price dropping from Rs329.18 per litre to Rs318.18.
Despite these price reductions, the government decided to increase the margin on petrol and diesel by 88 paisas per litre. This adjustment had a two-fold impact, affecting both oil companies and dealers.
Oil Companies’ Margin
Oil Marketing Companies’ (OMC) margin on petrol was raised to Rs6.94 per litre, up from the previous Rs6.47. Similarly, the margin on diesel increased to Rs7.17 per litre, compared to the previous Rs6.70. These adjustments meant that a larger portion of the consumers’ money was allocated to the oil companies rather than providing immediate relief.
Dealers, too, saw their margins rise on both petrol and diesel. Their margin on these products increased to Rs7.82 per litre, up from Rs7.41. While these margins may appear insignificant at first glance, they collectively contributed to a reduction in the impact of the price cut on the consumers.
Freight Margin Increase
In addition to the margin increase, the government also raised the freight margin on petrol and diesel. Diesel witnessed a substantial increase of Rs1.78 per litre, and petrol had a more modest 16-paisa per litre increase. These adjustments further added to the overall cost of petroleum products.
Taxation and Levy
Taxes and levies on petroleum products play a significant role in their final retail prices. Currently, the government imposes taxes of Rs65-70 per litre and a levy of Rs50 per litre on diesel. Petrol, on the other hand, bears the burden of taxes amounting to Rs80.29 per litre and a petroleum levy of Rs60 per litre.
Implications for the Public
The government’s decision to increase margins and freight costs on petroleum products has somewhat dampened the intended relief for the people struggling with rising inflation. While the initial reduction in prices was a positive step, the subsequent margin increase negated some of its benefits.
The recent adjustments in the pricing structure of petroleum products reflect the complexities of balancing economic relief with the financial sustainability of the oil industry. While the government’s intentions to provide relief to the inflation-hit population are commendable, it is essential to strike a balance that ensures both consumers and industry stakeholders benefit.