Modi government considers fuel price cut as Brent crude dips below $80

The article discusses the potential for the Narendra Modi government in India to reduce fuel prices in light of the recent drop in Brent Crude below $80 per barrel. The Bharatiya Janata Party (BJP), eyeing a third consecutive term in the upcoming general elections, may consider this move to address the increasing cost of living. Retail inflation in India has reached a four-month high of 6%, just within the Reserve Bank of India's tolerance band.

The government has implemented measures like export restrictions and limits on stockpiling to control prices. State-run oil marketing companies (OMCs), which control 90% of the market, have experienced improved profitability due to the significant decline in oil prices since September 2023. ICRA has reported increased marketing margins for OMCs on petrol and diesel.

Global oil prices have remained favourable, with forecasts indicating ample supply. Both the International Energy Agency and the OPEC+ coalition suggest a balanced market. Given the government's financial considerations over the next 12 months, the article suggests that this is an opportune time to reduce fuel prices, especially since Brent Crude was trading around $79 per barrel, contributing to OMCs' profitability.

Despite fluctuations, petrol and diesel rates have remained unchanged since May 2022, following the government's second excise duty reduction in response to crude oil exceeding $100 per barrel during the Russia-Ukraine conflict. The article underscores the economic and political considerations for the government to cut fuel prices in the coming months, especially in the context of the general elections and the need to address rising living costs.