Petrol-Diesel Outlook: Despite volatility in crude oil prices in the international market, domestic petrol and diesel prices have remained unchanged for over a year. Experts say that oil prices are likely to fall ahead of the Lok Sabha elections next year due to increase in tax revenue from the Center and softening of crude oil prices. Oil companies can take a big decision to provide relief to people.
Crude oil prices continue to fluctuate sharply
Crude oil prices are witnessing sharp fluctuations due to several geopolitical crises at the global level. Due to the Ukraine-Russia war, prices exceeded $100 per barrel but later stabilized below $90 per barrel. Prices fell below $80 per barrel in the first quarter of 2023.
This was followed by a 30 percent jump in prices during the July-September quarter. The increase comes after Saudi Arabia and Russia cut crude oil production and supplies. Due to which the price reached close to 100 dollars.
However, Russia later increased production, after which prices reached around $85 per barrel. At the same time, due to the recent Israeli-Palestinian conflict, the price was in danger of exceeding the level of $ 100 per barrel, but currently the price is around $ 80 per barrel.
Calculating Oil Revenues
Central and state governments receive revenue from oil through duties, cesses, royalties and VAT. The Center also collects dividends as well as corporate/income tax from public sector oil marketing companies (OMCs). In the financial year 2023, the Center will get Rs. 4.3 lakh crore was received, while states received Rs. 3.5 lakh crore was received.
The increase in excise duty and VAT rates over the past few years has increased the government’s revenue by more than 30 percent between fiscal 2019 and 2023. Petroleum products accounted for more than 17.5% of the Centre’s total revenue in FY 2023, compared to 15% for the states.
Pressure on companies to cut costs
Pressure to lower petrol and diesel prices has also increased as oil marketing companies have recouped the losses they were talking about and turned profitable. Informants say that companies did not increase the prices of petrol and diesel during the crude oil boom, but despite falling prices and profits, no relief was given on petrol and diesel. So companies may decide to cut costs. At the same time, if crude oil prices rise, companies will not pass the burden on to the public and bear the higher costs themselves.
Relief may be available before elections
Experts say oil prices are not expected to rise in the near future despite the volatile geopolitical scenario and the tightening stance of oil-producing countries. Not only this, the government’s tax revenue has increased by 16 percent in the first six months of the current financial year. The target was 10 percent. This reduces the pressure on the government to raise more capital or otherwise cover the deficit.
After reducing domestic LPG prices in August, the discount was also increased in October. This shows that the government is not against lowering the prices of petrol and diesel. Oil companies may cut prices ahead of general elections next year.
The Union Minister also hinted: Recently Union Petroleum and Natural Gas Minister Hardeep Singh Puri hinted at reducing the prices of petrol and diesel. He said that the central government is encouraging the state governments to join the effort to reduce fuel prices.
These five factors
1. There is no possibility of increase in crude oil prices
2. Big L companies made profits
3. Retail and wholesale inflation softened
4. Government reduced windfall tax on diesel
5. Reduction in domestic LPG cylinder prices