FUEL PRICING
- December 15, 2020
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Subject: Economy
Concept:
Fuel pricing mechanism
- The Indian basket of crude oil represents a derived basket comprising Sour Grade (Oman and Dubai average) and Sweet Grade (UK based) of crude oil processed in Indian refineries.
- Prices of petrol and diesel have been made market-determined effective June 2010 and October 2014 respectively.
- Since then, the Public Sector Oil Marketing Companies (OMCs) are supposed to take appropriate decisions on the pricing of petrol and diesel.
- It must be in line with international product prices and other market conditions such as exchange rate and the demand-supply situation, among others.
- From June 2017 dynamic daily pricing is being followed.
Determining factors of fuel costs
- Market factors -The price is determined by the movement of crude oil price (the main raw material), the rupee/dollar exchange rate and demand-supply situation in the market.
- Excise duty-There was a series of excise duty hikes in the second half of 2015 and the initial months of 2016 on both petrol and diesel to help shore up finances.
- This has helped the Centre realise higher central excise duties will fetch higher revenues.
- Oil companies –Oil companies have the pricing freedom and Government has no business interfering in the day-to-day affairs of the companies.
- At many instance companies buy crude oil at high price and they sell it for low price due to market trends, to match this losses they hike the prices.