Despite a Rs 3 excise duty raise per liter, this month's petrol and diesel prices got cheaper by Rs 2 a liter as crude oil remains stuck in a bearish phase. Today, state-run fuel retailers are cutting petrol prices by 16 paise/liters and diesel prices by 15 paise/liter. Had the government refused to increase excise duty to plug India's growing fiscal deficit, last week's fuel rate cut would have been much sharper. Despite softening crude oil levels, oil and diesel prices have sustained a decreasing trend as of February 27.
Retail inflation rose 7.59% in January 2020, as food inflation remained in double-digit. After Covid-19 rapidly spread, the supply of food items increased and the demand decreased. As a result, the price of food items cut. This could help the Monetary Policy Committee (MPC), as they are struggling for a rate cut amid elevated inflation. This price cut could adversely impact rural consumption. Lowering food prices could cause a return of agricultural income distress, according to Credit Suisse.
In the midst of falling crude prices, petroleum marketing companies cut the prices of petrol and diesel by more than 2 rupees. While petrol now costs less than 2.69 rupees, diesel has seen its reduction by 2.33 rupees. So now in Delhi you will only have to pay Rs 70.29 for petrol and Rs 63.01 for diesel. For India, which imports more than 84% of its oil needs, the crisis would lead to a drop in the import bill and a drop in retail prices.
Several consumer products, from soaps to shoes, smartphones and household appliances, will cost more as several companies plan to pass on the increase in customs duties to consumers. Apple raised prices on select iPhone models, while sportswear brand Puma India will raise prices by 10% starting in April. Prices for air conditioners, washing machines and refrigerators will increase by 3 to 6% from this month due to the 2.5% increase in basic customs duties. Also, due to rising component and logistics costs in the wake of the Covid-19 crisis in China.
India's economy is currently the slowest expansion. In this scenario, annual refined fuel demand of India is expected to hike 3.1% in the next fiscal year to March 2021 from the estimated 1.3% in 2020, by the data of the government. The Petroleum Planning and Analysis Cell of the federal oil ministry said on Monday refined fuel consumption in India is expected to total 222.79 million tonnes in 2020/21, based on oil demand. Diesel demand is also estimated to rise by 2.8%.
According to provisional govt data, the electricity supply of India rose 7.1% in February. This is the second straight month of growth after a decline. In February, power supply rose to an average of 3.62 billion from 3.38 billion units per day, data showed by state-run Power System Operation Corp Ltd (POSOCO). It is expected to release official data on power demand this month. Annual consumption of electricity by Indian industries more than two-fifths of India’s annual electricity consumption. Residences consumption is nearly a quarter. And commercial establishments another 8.5%.
Cooking oil is expected to cost up to 10% less over the next week as world prices fall due to coronavirus. Global prices have a strong influence on the Indian market because the country imports nearly 70% of its annual consumption of edible oil, i.e 23.5 million tonnes. Current wholesale prices of branded soyabean and palm oil are Rs 78/liter, while those of sunflower oil are Rs 82/liter. With the spread of the coronavirus, a further drop in prices of Rs 3/liter is expected.
Aviation turbine fuel (ATF) prices were slashed by a steep 10.3% to Rs 56,859.01 per kilolitre, as international oil prices slumped on fears of the spread of coronavirus. This is the second straight reduction in ATF rates in as many months. At the same time, the rates of non-subsidised cooking gas (LPG) were cut by Rs 53 to Rs 805.50 per 14.2-kg cylinder from Rs 858.50 earlier. As the international oil prices have fallen, the government's subsidy payout will fall by almost Rs 50 per cylinder to Rs 240.
The price of petrol and diesel are down 22 paise per litre and 20 paise per litre respectively today, as Brent crude oil fell nearly 14% last week at around $51 a barrel. Petrol prices are now at their lowest level in 5 months while diesel prices are at their lowest level in 7 months. In Delhi, a litre of petrol is priced at Rs 71.49/litre and diesel at Rs 64.10/litre. Domestic fuel prices have declined since last week as global oil prices fall amid fears of a coronavirus pandemic.
Palm oil prices have dropped more than 12% so far this week. After the coronavirus rapidly hit China, the demand for Palm oil has reduced. Another reason for this pressure is political uncertainty in Malaysia. This is the worst drop in palm oil prices since 2008. The most-consumed edible oil has also down 27% from January this year. Slumping in petroleum prices and weaker export was also responsible for this scenario.