Share prices of the three government-owned oil marketing companies (OMCs) fell on Wednesday on pricing worries, which the government later said were baseless.
Reports suggested the three -- Bharat Petroleum Corporation (BPC), Hindustan Petroleum Corporation (HPC) and Indian Oil Corporation (IOC) -- might be asked to absorb the recent global hike in crude oil prices. As a result, their share prices fell 6.2%, 5.1% and 4.3%, respectively, on the BSE exchange.
The markets were worried on whether the government was going back to the regulated pricing era. However, after trading hours, petroleum minister Dharmendra Pradhan
said the government would not ask state-run companies to absorb the price rise in petrol and diesel and would stay to market-driven pricing.
He added that a shift to the goods and services tax (GST) regime was the only way to have a transparent tax structure on fuel items.
"The government has no business to interfere in the day-to-day affairs of companies. We have linked product prices to the market and will stick to that," said Pradhan. The minister added that global prices would ease very soon.
"A knee-jerk reaction is not required when we are following a formula. We expect prices to come down soon. This increase is mainly because of the cyclones that hit the US, which resulted in a decline of refining capacity
by 13% and an increase in diesel prices by 20% and petrol by 18% in the past three months," he added.
Petrol prices were decontrolled in India in 2010, while diesel prices got market freedom in October 2014. On June 16 this year, the OMCs shifted to a daily pricing system. The criticism the government faces is that the tax components are 40-50% in various states.
Asked if the ministry would request its finance counterpart to cut the excise duty on petrol and diesel, Pradhan said, "That is for the finance ministry to decide. Of the Central excise duty, too, 42% share goes to states. However, we want the remaining petroleum products also to be under GST, as it is the only way to have a transparent tax structure." Petrol and diesel have been excluded from the GST ambit.
The minister said spending on social sector schemes and infrastructure projects had risen substantially in the tenure of the present government. "The revenue from excise duty on fuel increased from Rs 99,000 crore in 2014-15 to Rs 2.42 lakh crore in 2016-17, which we were able to divert into welfare schemes," he said.
The speculation was that the government might intervene, after prices inched close to Rs 80 a litre in Mumbai and Rs 70.38 a litre in Delhi. The price of Brent crude was $54.65 a barrel at one time on Wednesday.