Exclusive: PM to announce massive cuts in petrol, diesel prices before year-end

Get ready for a new year bonanza. With the general elections due in the first half of 2024, Prime Minister Narendra Modi’s government is working on huge cuts – upwards of Rs 8 per litre – in the retail prices of petrol and diesel that would be announced before the calendar year ends.

According to sources, the Petroleum Ministry has prepared a proposal incorporating the cuts ranging from Rs 8 to Rs 10 per litre in both fuels for the Prime Minister’s approval that could come on Thursday.

The rationale in the Ministry’s proposal for the huge reductions is the sharp drop in the purchase price of imported crude oil that goes into refineries to produce these two fuels, among others.

The price of crude oil during financial 2023-24 (April-March) so far was at an average of $77.14 per barrel with only two months – September at $93.54 and October at $90.08 – witnessing a spike. The average crude oil price in 2022-23 was $93.15 a barrel.

With ex-refinery prices of the two fuels unchanged since April 6, 2022, the current fiscal’s low crude oil prices have yielded large profits for the three government-run oil marketing companies – Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp. In the first six months of this fiscal year, IOC, BPCL and HPCL made a combined net profit of Rs 58,198 crore.

For the losses in last fiscal 2022-23 due to $90-plus crude prices, the Union Budget for 2023-24 announced a support of Rs 30,000 crore for the three government-run oil marketing companies as equity infusion under the guise of funding their green carbon initiatives but the money was not devolved due to this fiscal year’s bounty.

Sources said that the price cuts could also be a clarion call from the ruling party of its intention to announce the elections early to ride on the landslide victories in three of the four big states. It would surely help quell the Opposition’s agenda to project inflation as the government’s biggest failure, they added.

On May 22, 2022, the central government reduced the Central Excise Duty on petrol and diesel by Rs 8 and Rs 6 per litre, respectively, to bring down inflation as the two automotive fuels impact the Wholesale Price Index (WPI) with respective weightage of 1.60 per cent and 3.10 per cent in the WPI.