Minister of Petroleum and Natural Gas Hardeep Singh Puri has said that while the government is prepared for any situation arising from the rise in crude oil prices, the steep increase in prices has not impacted domestic demand so far.
India has projected the Gross Domestic Product (GDP) growth rate at 8.0-8.5 percent in 2022-23, which hinges on crude oil prices being in the range of $70-$75 a barrel. But benchmark Brent crude futures prices have soared above $93 a barrel, with concerns that escalating geopolitical tension may push it up further.
“I don't foresee the volume of crude available for consumption suffering from any major setback. But there will be a sentiment on price, and that price sentiment in the event of an exacerbation of tensions could have a trajectory which is upwards,” Puri told CNBC-TV18 in an exclusive interview.
The minister said that the government has taken long-term steps to address concerns over India’s vulnerability to crude oil prices by giving a push to domestic production and encouraging ethanol blending in fuel.
“Last time when there was an increase, all the countries which are major consumers spoke to the OPEC plus; they also took some other actions. In the coming days, we will keep our fingers crossed. We will monitor closely and I'm sure we will make the right decision,” Puri said.
Crude oil prices have been volatile this week amidst reports of heightened tension over a likely Russian invasion of Ukraine. While the US has been warning that an invasion may be imminent, Moscow has denied it so far.
“I hope that the margin of persuasion on which diplomacy is anchored, will be utilised and we will see a situation in the next few days that instead of an exacerbation of tension, there is a lowering of tension and that the total volumes made available to the international market will be those which respond to the demand,” Puri said.
He said that despite the rise in energy prices, domestic demand has not been impacted.
“The interesting thing to note is that even though our consumption today is way higher than the pre-COVID time, the higher prices have not discouraged the offtake. Normally, when prices are higher you would expect that the demand would fall. So you have to pay the price for an economy which is firing on all cylinders,” Puri said.
When asked if the government could reduce the excise duty on petrol and diesel to reduce the fuel cost in the country, Puri said that the excise mop-up has been used to finance free rations and COVID vaccines and other government programmes.
Excise duty and value-added tax on fuel accounts for 40-50 percent of the price and is a major source of revenue for the Centre and state governments. The government left it unchanged in the Union Budget announced earlier this month.
The oil marketing companies (OMCs) -- Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation– change the price of fuel sold at retail pumps every fortnight to align it with the international rates. The central government had last cut excise duty on November 4, 2021, to provide relief from prices as crude oil was around $80 a barrel at the time. Since then crude oil prices have gone up significantly but the oil marketing companies have left them unchanged for over 100 days.
Puri denied that the OMCs have left the prices unchanged due to the ongoing state elections.
“As far as oil marketing companies are concerned, they take their decisions on the basis of commercial consideration. It's not that every morning the oil marketing companies turn to us and say should we raise the price?” he said.
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