Reduction in excise duty affirms the process of price-setting: HPCL

The government has cut excise duty on petrol and diesel by about Rs 2 a litre and there is also a thought process that maybe now states will also need to reduce value added tax (VAT) a bit.

In an interview to CNBC-TV18, MK Surana, CMD of Hindustan Petroleum Corporation (HPCL) said that oil marketing companies (OMCs) build prices depending on international rates.

Below is the verbatim transcript of the interview:

Anuj: We saw Rs 2 cut in excise duty on petrol and diesel and including the VAT impact the price reduction was about Rs 2.5 on petrol and Rs 2.25 on diesel. Do you think that is it for now or is there pressure on oil marketing companies also to take a bit of a hit and maybe cut the marketing margins also a bit?

A: As of today the excise duty has cut by Rs 2 on petrol and diesel leading to an impact of Rs 2.5 on petrol and Rs 2.25 on diesel. Yesterday oil minister requested the states also to look at the VAT component because in some of the states the VAT component is high; it varies from state-to-state but that is for the state to look at it because over a period of time VAT has also increased a bit.

Related stories

MK Surana

CMD|HPCL

• 
  Expect crude prices to remain stable in March; post healthy margins in Q4: HPCL
• 
  Expect growth trend to continue; crude oil to range in $62-68/bbl mark: HPCL
• 
  Boards of ONGC, MRPL & HPCL yet to mull possibility of HPCL-MRPL merger: HPCL

As far as OMCs are concerned, we are building up the price depending on the international prices and as the crude price and product prices move, the price will be decided accordingly. So of now that is the way it is and we are trying to ensure that the prices are in line with the international market and at the same time least impacted to the consumer.

Latha: The point is repeatedly we get fillers from Delhi that the centre has done its bit, the states have been asked to do their bit and the oil companies will be nudged to do their bit. What is nudging. Government is your shareholder, they can tell you to work with lower margins. Have they told you?

A: As I mentioned earlier, right now it is build based on international prices. Oil marketing companies, the majority shareholder of the public sector undertaking (PSUs), they also do not operate purely on the commercial basis; we also see the larger interest of the consumer but at the same time ensuring that the commercials of the companies are also healthy. So as of today government has taken a decision to reduce the excise duty which is a good move because it also affirms the confidence level in the price mechanism which was decontrolled earlier.

Surabhi: Gong forward as you set your marketing margins, will the consideration purely be commercial interest or will you also look at "consumer interest" as you mentioned?

A: It depends on how the prices move. If the prices are at reasonable level then it will be purely market driven. If it goes very high then we need to look into it as things develop but one thing to be looked at is that when you have the market determined prices it can be both ways; it can go up, it can go down also but as I see, going forward the international prices, the gasoline prices softened a bit as far as crack are concerned. Diesel is still stable and in next two months, I see, that's the way it is likely to be but gasoline crack have started softening up so let's see how the prices move. Of course crude prices have softened a bit from USD 59 per bbl to USD 56 per bbl or so but ultimately it depends on product prices.