According to CLSA, petrol and diesel prices might be reduced after October 5, based on speculation following remarks from Pankaj Jain, Secretary of the Ministry of Petroleum and Natural Gas, who suggested a possible reduction last month.
Prices have remained unchanged since March 2024. Jain mentioned that state-run oil marketing companies (OMCs) might think about lowering petrol and diesel prices if international crude prices stay low for an extended period, according to media reports.
The CLSA in its note said, “Maharashtra is a crucial battleground, and the BJP-led alliance may consider lowering fuel prices as a populist move.”
According to several media reports, Maharashtra’s state elections are expect- ed in early November. Final dates for the state election are likely announced by mid-October.
The CLSA report indicates that alongside any reduction in retail fuel prices, the government might also increase excise duties on petrol and diesel. Currently, the Centre imposes an excise duty of Rs 19.8 per litre on petrol and Rs 15.8 per litre on diesel. Presently, these excise duties are 40% and 50% lower than their peaks in 2021.
CLSA estimates that for every rupee increase in excise duty on petrol and diesel, the government could collect an additional Rs 16,500 crore and Rs 5,600 crore annually, respectively.
Excise duty is a tax applied to the manufacture or production of goods within a country. For petrol and diesel, it is imposed by the Central government on their production or sale in India. Recently, crude oil prices have experienced a significant decline in the international market. As of Wednesday, the benchmark Brent crude was priced at $74.15 per barrel, while WTI was at $71.16 per barrel.
The report said the sharp decline in crude oil prices is positive for Indian oil marketing companies like Indian Oil, Bharat Petroleum Corporation and Hindustan Petroleum Corporation.
However, a potential rate cut and excise duty hike make these oil marketing companies vulnerable.