New Year New Highs

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File Photo: Public Front India's National English Weekly

Petrol hit an all-time high of 84.2 per litre in the national capital. In Mumbai, petrol retailed at ₹90.83 per litre while diesel at 81.07 per litre. In Chennai, petrol was at ₹86.96 a litre and diesel at ₹79.72 a litre. In Kolkata, petrol was being sold today at ₹85.68 a litre while diesel at ₹77.97.

This is the second time a highest ever rate for petrol has been reached within a span of 3 years. Highest ever rate of ₹84 a litre for petrol in Delhi had touched on October 4, 2018, according to Press Trust of India. Diesel too had risen to an all-time high of ₹75.45 a litre on October 4, 2018.

Between 2014 and 2020 India has seen a ten times rise in excise duty which now forms a major chunk of petrol and diesel prices. In 2014, the excise duty on diesel was Rs 3.56 and that on petrol was Rs 9.40. And by 2020, the excise duty has increased at least 10 times. The central government has increased the excise duty on petrol to Rs 32.98 per litre from Rs 19.98 at the beginning of the 2020, and increased the excise duty on diesel to Rs 31.83 per litre from Rs 15.83 over the same period.

It may be remembered how before 2014 the BJP which was then in opposition had taken out signature cycle ride protests demanding cuts in petrol and LPG prices. But between the first year of the first term of the Modi government and the first year of its second term excise duties have seen manifold increases.  Congress has been protesting the move. The opposition has repeatedly called the increase in the price of petrol and diesel ‘unjust’, ‘thoughtless’, and demanded from the Central Government to roll back increase with immediate effect and pass on the benefit of low oil prices directly to the citizens of this country.

Since India imports most of the fuel required to meet its demands, the price of fuels rises in tandem with global prices. Domestic prices of petrol and diesel are revised by oil marketing companies based on changes in the international prices of petrol and diesel. However, when global crude prices crashed during lockdown, Indian Oil Marketing Companies stopped revising the prices of petrol and diesel. Now OMCs have hiked the prices of petrol and diesel citing rising global crude oil prices and an improved demand outlook for petroleum products due to the prospects of a viable vaccine for Covid-19.

International benchmark Brent crude was up 8 cents at $54.38 a barrel, after gaining 1.3% overnight. The likelihood of tighter supplies after Saudi Arabia voluntarily agreed to cut output have led to a increase in global oil price in recent days.

But in March 2020 the price of Brent crude had crashed to $19 per barrel due to global restrictions on travel. However, neither the OMCs nor the central government then made any corresponding cuts to reflect changes in global crude oil prices. In fact, the central government and a number of state governments have significantly increased the duties on petrol and diesel as a way to boost revenues since the Covid-19 related lockdown severely curtailed economic activity.

The central and state taxes currently account for nearly 61% of the retail price of petrol and around 58% of the retail price of diesel in Delhi. Reportedly the revenues collected by the Centre from the sales of petrol and oil products have nearly doubled since 2014. Excise duty forms the biggest component of the price of petrol and diesel while VAT collected by state governments makes up less than a quarter of the price. The base price of the petrol is less than a third of the price the buyer gets it from the retailer.

The latest hike is reportedly the 57th revision in the price of petrol and the 68th revision in diesel price since April 2020.

 

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