The retail prices of petrol and diesel moved almost in tandem with the international prices of crude during the first year after the dismantling of the administered pricing mechanism in the petroleum sector on April 1, 2002.

The international prices of the Indian basket of crude rose 24.61 per cent to $24.35 a barrel now from $19.54 a barrel in February 2002, which was taken as the base for setting the retail prices of petrol and diesel on April 1, 2002.

During this period, petrol prices increased 22.41 per cent to Rs 32.49 a litre from Rs 26.54, while diesel prices rose 27.30 per cent to Rs 21.12 a litre from Rs 16.59.

However, it seems the oil companies did not pass on the entire benefit of the 2 per cent reduction in the excise duty on petrol and diesel with effect from June 3, 2002.

The government resorted to this duty cut to contain the impact of excessive volatility in the international prices of crude on the domestic prices of oil products.

If this duty cut is taken into account, the retail prices of diesel and petrol could be reduced further.

However, the oil companies also did not pass on the entire increase in the international prices of crude to the consumer.

While there was a 27.9 per cent rise in the international prices of the Indian basket of crude during February-May 2002, the domestic oil companies did not increase the retail prices of petrol and diesel.

The retail prices of these automobile fuel are calculated by taking into account the import parity prices, freight up to the depots, marketing costs and margins, state-specific irrecoverable levies, excise duties, delivery charges from depots to retail outlets, sales taxes and local levies, and dealers' commissions.

Some of these factors, like marketing margin, are not clearly defined and are left to the discretion of the oil marketing companies.