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India will not delink local oil prices from global rates: oil minister

New Delhi (Platts)--14 Sep 2017 240 am EDT/640 GMT


India will not delink domestic fuel prices from market mechanisms despite the recent rise in global crude prices, Oil Minister Dharmendra Pradhan said Wednesday.

"The government cannot change fuel pricing on a knee-jerk basis," Pradhan said after a review meeting on current fuel prices with domestic refiners and oil companies. He also ruled out any cut in taxes to ease the impact of fuel price rises.

India's retail diesel and gasoline prices have risen 10-12% since early July amid an uptick in global crude and product prices.

The minister attributed the recent global increases mainly to hurricanes Irma and Harvey in the US.

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India introduced daily revisions of retail fuel prices from June 16 to align local rates with the global crude price. Prior to that, oil companies considered revisions on a fortnightly basis. India, one of the world's leading consumers of diesel and gasoline, has been using market-linked pricing mechanisms since April 2012, but since June 16 domestic oil marketing companies like IOC, HPCL and BPCL have been considering revisions to gasoline and diesel prices on a daily basis.

"Any sharp global oil/product price movements could raise the specter of government intervention again," Credit Suisse said in a note on Thursday.

Pradhan said the daily price mechanism was beneficial as any drop in international crude rates could be passed on to consumers immediately, rather than waiting 15 days for a downward adjustment as in the past.

The reverse was also true when global prices rose, he acknowledged.

The minister said he hoped that domestic fuel prices would ease in coming days, reflecting expectations of a softening in global prices.

--Ratnajyoti Dutta, newsdesk@spglobal.com
--Edited by Wendy Wells, wendy.wells@spglobal.com




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