Consumers did not the full benefit from a slump in global crude oil prices since last year, as the excise duty imposed on fuel prices negated some of the gains that they could got.
The price of the Indian basket of crude oil has fallen by 36% to Rs.3, 283.36 a barrel between 31 October 2014 to 9 October 2015, supported by a huge decline in overseas crude oil prices, a data from Petroleum Planning and Analysis Cell showed.
But there was no proportionate reduction in retail prices of petrol and diesel in the country. In Delhi, diesel prices saw a decline of just about 16%, as the government raised excise duty by Rs 5 per litre between November and January.
The additional tax imposed on fuel prices resulted in lower benefits for consumers, although international crude oil prices have halved since June last year.
The tax component in diesel prices rose from 18% to 38% and on petrol prices, to 49% from 31% since November last year, according to Harshad Borawake, vice-president (research) at Motilal Oswal Securities Ltd.
Due to the tax effect, petrol prices have come down by just about 5% since the beginning of November 2014.
A decision by the Organization of the Petroleum Exporting Countries (OPEC) to keep crude oil output unchanged at its November last year had accelerated the fall in oil prices.
In addition to tax, analysts point out "the decline in specific product prices and related crack movements" as another reason for the big difference between retail fuel prices and Indian basket prices.
"Like India, some other countries too have seen relatively slower fall in domestic fuel prices (combination of tax and profit margin for companies)," Livemint quoted Borawake as saying.
For the Modi government, it was a much-needed relief, as retaining a major share of the benefit from the decline in global crude oil prices has helped it in improving its precarious fiscal position.