Understanding The Rise In Fuel Prices In India

Understanding The Rise In Fuel Prices

Over the years, while crude oil prices have decreased to $63 per barrel, petrol prices have been on the rise in India, and is nearing Rs 100/litre in many parts of the country. The price of LPG gas cylinder has also increased by Rs 50. Given this, people are bound to ask — why the rise?

In 2013…

Back then in November 23, when Narendra Modi was a BJP leader and Chief Minister of Gujarat, he attacked the Manmohan Singh government over the rise in LPG and petrol/diesel prices in the country.

January 2020 Vs January 2021

Compared to January 2020, the rate of petrol in January 2021 is about 13.6 percent higher, while the price of Brent crude oil has been lower by around 14 percent during this period.

In 2014…

When the Modi government came to power for the first time in June 2014, the price of crude oil was $ 93 per barrel in the global market and so petrol was Rs 71/litre and diesel close to Rs 57/litre.

Seven Years Later…

But seven years later, the price of crude oil has gradually reduced by $30 to $63 per barrel, yet India has been seeing a continuous rise in the price of petrol/diesel.

So How Much Do You Pay In Taxes?

The table below shows the price break-up of petrol (Delhi). According to Indian Oil, the retail selling price of petrol on February 16 was Rs 89.29. Out of this, a whopping Rs 53.51 is because of VAT (value-added tax) and excise duty.

But Why Isn’t The Government Cutting Taxes To Reduce Rates?

The central government has clearly stated that it will not cut excise duty on crude oil to give relief to consumers from the spiraling retail prices of petrol and diesel.

What Did The Union Oil Minister Say?

Replying in Rajya Sabha earlier this month, Union Oil Minister Dharmendra Pradhan said that the Centre and state governments rely heavily on collections from taxes on crude oil “for meeting their developmental and welfare priorities”.

Two Main Reasons For The Rise

Dharmendra Pradhan blamed it on oil-producing countries for “less fuel production. Two main reasons — The international market has reduced fuel production and manufacturing countries are producing less fuel to gain more profit.

What Did The Prime Minister Say?

Interestingly, Prime Minister Narendra Modi blamed the UPA regime for the ongoing rise in fuel prices. “The middle-class would not have been burdened if the previous governments had focussed on reducing India’s energy import dependence,” he said recently.

But How Will This Affect Your Life?

• The transportation cost to take vegetables from the farm to the market will increase. This may reflect in the prices of the essential commodities.
• A direct impact of rising fuel prices is the increase in what you spend on fuel every month for your daily commute.