Exploring the Discrepancy: Why Petrol and Diesel Rates Are Hiking in India
The recent surge in petrol and diesel rates in India, despite a decrease in international crude oil prices, has raised questions among the public and the media. Through an RTI (Right to Information) application, it was revealed that high taxes at central and state levels are the primary reason for the skyrocketing prices. This article delves into the intricacies of the current fuel pricing structure, examining the disparities and exploring measures to address the issue.
Understanding the Fuel Pricing Structure in India
According to data provided by the Bharat Petroleum Corporation Limited, the price dealers pay for Maximum Selling Price (MS) petrol and High Speed Diesel (HSD) excludes exercise duty, central tax, VAT, and dealer commission, totalling only Rs 40.65/liter and Rs 42.15/liter respectively.
However, the total cost to the consumer, including taxes, rises tremendously. A liter of petrol now costs the consumer Rs 100.60, with taxes accounting for over 90% of the retail price. This stark increase is perplexing, as the crude oil prices have only risen by 11.1% since the beginning of 2020, while petrol and diesel prices have skyrocketed by 32.9% and 31.5% respectively.
The Impact of Taxes on Fuel Prices
The Economic Times highlights that the government significantly raised taxes on fuel last year when oil prices crashed, but is refusing to roll them back. Central and state taxes make up almost 60% of the fuel’s retail price.
Between May 2014 and June 2021, the central government's share of taxes on the retail price of petrol increased by 216%, even as the base price of fuel declined by 24%. This rise is not a reasonable increase given the current economic scenario and the intended welfare of the people.
Implications for the Average Citizen
The hike in fuel prices has significant implications for the average Indian. The country is now among the most expensive markets in the world, with the highest fuel prices at 260 per liter, as per reports.
Furthermore, the economic situation in India has worsened due to the Indian government’s measures such as demonetization, which brought down the GDP from 8.2% in 2014 to 3% pre-Covid lockdown, and a harrowing -24% post-lockdown. Despite these challenges, the government continues to rely on fuel taxes to bridge their fiscal deficit, which is a contentious and debated issue.
Expert Opinions and Recommendations
The Reserve Bank of India (RBI) has repeatedly urged the government to reduce fuel taxes to mitigate inflationary concerns. However, the government has largely ignored these recommendations. This raises questions about the fiscal policies and their impacts on the common man.
Experts recommend that instead of relying on fuel taxes to cover fiscal deficits, the government should prioritize welfare measures such as cutting expenditure on luxurious projects like Central Vista. It is suggested that cutting unnecessary expenditures would significantly benefit the economy and the welfare of the people.
Conclusion
The discrepancy between international crude oil prices and the current fuel prices in India is a result of a complex interplay of tax structures and economic policies. While the government aims to implement welfare measures through these taxes, the real impact is often felt by the common people, particularly the poor.
The situation calls for a reevaluation of current fiscal policies and a more balanced approach to fund government schemes. It is crucial to strike a balance between economic welfare and fiscal responsibility, ensuring that the common man does not bear the brunt of poorly managed policies.