Petrol Hits Rs.100, Who Is Responsible? – Prof K Nageshwar

The price of petrol touched Rs.100 a litre in many parts of India. The unprecedented rise in fuel prices is also contributing to higher inflation. Government as usual calls it a free market reality. But, Indian’s have not witnessed a fuel price increase during the campaign for assembly elections. Market forces have no obligations for elections. Prices of petrol and diesel started raising almost every day since May 03, a day after election results were announced. This reveals that despite claims of linking it to the global market, the political bosses continue to have sway on the fuel prices.

It is true that India imports about 80 percent of its crude oil requirements. Therefore, any rise in the prices in the global market is bound to have an impact on domestic fuel prices. But the anatomy of fuel price rise reveals a different story.

International crude prices increased from around $31 per barrel in May 2020 to over $68 today. Despite more than a 100 percent increase in the international crude prices, the base price of petrol and diesel in the domestic market has registered around Rs 3 to Rs 4 increase only. This is precisely because of the dollar-rupee exchange value fluctuations as oil imports have to be paid in dollars.

The base price of petrol increased by Rs 3.53 a litre, while the retail price rose by Rs 20.81 per litre during the same period. Similarly, the corresponding figures for the diesel prices are Rs 4.17 and Rs 20.32 a litre.

This is the result of a massive increase in taxes and duties on petroleum products. The centre raised excise duty of Rs 13 on petrol and Rs 16 on diesel between March and May last year when oil prices collapsed due to the pandemic. The two hikes raised excise duty by 65% on petrol from Rs 19.98 to Rs 32.98 a litre and 79% on diesel from Rs 15.58 to Rs 28.35. Excise duty accounts for 36 percent and 34 percent respectively of the current retail price of petrol and diesel.

States also impose VAT in addition to central duties and cesses making petrol and diesel much costlier. However, official data also reveals that the centre has relatively benefitted more than the states due to higher fuel prices. Centre has been increasing various kinds of cesses on petroleum products as revenue accrued from them are not shared with states. Whether it is the centre of states, the fact remains that the consumer caught in the pandemic is facing the burden of higher fuel prices that too at a time when the wage and job cuts are rampant and inflation is high.

By Prof K Nageshwar

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