“We have raised the price of petrol by Rs 9 (per litre) over 12 or 13 days, whereas the international (oil) price has shot up… Our percentage increase is one-tenth of what it is elsewhere,” Puri said during a discussion on the Russia-Ukraine conflict and evacuation of Indians studying in Ukraine.
“I have some figures which show a comparison in the prices of gasoline (petrol) between April 2021 and March 2022. In USA, during that period, the increase in prices of gasoline in terms of percentage is 51%. In Canada the increase is 52%, in Germany and UK it is 55%, in France it is 50%, in Spain it is 58%, in Sri Lanka it is 55% and in India, it is just 5%,” he said.
At one level, Puri’s statement is a clear indication that we are yet to see the last of the fuel price hikes, though under-recoveries have shrunk as India’s crude cost has softened to $102/barrel from a high of $130.
At another level, the mention of Sri Lanka along with incomparable western economies is a cautionary signal that the populism of artificially keeping prices low may lead to the country running out of gas – literally.
This is why the government allowed pump prices to be raised but still moderates the upward curve to cushion the shock. Officially, retailers are free to set pump rates.
But it is no secret the government exerts informal control through the state-run retailers, which operate 90% of the outlets.
This is unlike the countries mentioned by the minister, where, except in Sri Lanka, fuel prices are freely determined by the market without any government overhang.
Brokerages reckon the prices have to be raised by about Rs 15-16 a litre to cover the under-recovery arising from retailers freezing prices for 137 days since November 4, the day they declined sharply due to central and state tax cuts, ahead of polls in five states.
They began raising prices from March 22, nearly a fortnight after the polls were over.
In between, India’s crude cost rose from $84/barrel to well above $100 on the back of global crude price hitting 14-year high of $139 on March 7, leaving an under-recovery of Rs 20-22 per litre.
“At the height of Covid-19, and I talk about March 2020, gas prices were $19.56 dollars a barrel. They went up in 2021 to $60 and $80. On 24th February, when the military action took place, suddenly they shot up to $92 and then up to $124 dollars and then up to $130,” he said. It appears Puri was referring to oil prices when he said ‘gas’.