In a significant development that could bring relief to consumers nationwide, the Centre is contemplating a substantial reduction in petrol and diesel prices. The timing of this potential move is crucial, with the 2024 Lok Sabha elections looming on the horizon, scheduled for April and May next year.
Government Initiatives for Price Cut
Discussions are currently underway with Oil Marketing companies (OMCs) to devise a strategy that alleviates the burden on the common man. Sources suggest that a proposal is being considered, wherein the government and OMCs share an equal burden of the impending price cut. The Centre is even contemplating a noteworthy price reduction, possibly up to Rs 10 per litre. Such a move holds the promise of not only providing economic relief to consumers but also mitigating the impact on retail inflation, which surged to a three-month high of 5.55% in November.
Collaborative Efforts by Ministries
Recent discussions between the Petroleum Ministry and the Finance Ministry have resulted in a set of options being presented to the Prime Minister’s Office (PMO). These crucial dialogues, held every fortnight, focus on the intricate dynamics of fuel prices, aiming to strike a balance between economic factors and public welfare.
Favorable Conditions for Price Cut
The Union government is leaning towards a fuel price cut, propelled by the steady trend of crude oil prices lingering in the $70-$80 per barrel range for the past three months. This is a crucial factor as the Central government had already taken proactive measures by reducing Central Excise duty. A total reduction of Rs 13 per litre on petrol and Rs 16 per litre on diesel occurred in two tranches in November 2021 and May 2022, respectively. Importantly, these excise reductions were fully passed on to consumers, resulting in a visible decline in retail prices.
Economic Impacts and Profits
The sustained period of low crude oil prices has proven to be financially advantageous for the three government-run oil marketing companies—Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL), and Hindustan Petroleum Corp (HPCL)—in the fiscal year 2024. The profitability of these entities has been bolstered, and the positive economic ripple effect is anticipated to extend to consumers.
Current Global Oil Scenario
As of the latest update, oil prices are holding steady, with Brent trading near $80 a barrel. This stability is attributed to higher inventories and record output in the United States, which, for the moment, overshadow concerns about global trade disruptions in the Red Sea.
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