What are the reasons for the petrol, diesel and gas price hike?

YouTurn EditorialFebruary 25, 2021

196 4 minutes read

With petrol and diesel price hikes making headlines in almost every newspaper as “extraordinary peak” and “nationwide shock”, there are two main reasons for the rise in fuel prices. The international market has reduced fuel production and producing countries are producing less fuel to make more profit. It affects consumers, ”said Union Petroleum Minister Dharmendra Pradhan.

The minister also promised that “rates will gradually fall as the global petroleum trade continues to grow.” According to the Union Minister, the reason for the increase in fuel prices is not justified by the rising international crude oil prices.

According to the Petroleum Planning and Analysis (PPAC) Cell, crude oil prices in India will rise to $19 a barrel in April 2020 (US value) and $54 in January 2021. But its contribution to vehicle fuel prices is small.

An average of 60% of the amount we spend on fuel goes to the government, for both central and state.

The Central Government levies a tax of Rs.12.40 and a cess of Rs.20.50 for agricultural infrastructure and development and road infrastructure with a total of Rs.33 as tax.

According to the Comptroller General of Accounts (CGA), the value of tax collected by the central government in April-November 2020 was Rs 1,96,342 crore. It’s 2019 in- collected Rs .1,32,899 crore more than that. Due to Corona, less than 10 million tonnes of diesel and 12 million tonnes of petrol were used, but the tax collection was high.

The ruling BJP government has decided to raise excise duty on petrol (Rs 13 per litre) and diesel (Rs 15 per litre) in two instalments in March and May 2020, when people across the country were immobilized and without income. On top of this, the Tamil Nadu government tax is Rs.22.64

“I have to set aside some separate extra money for petrol for every month”, “No matter how much I work, I will not be able to put petrol above 50 rupees sir”, voices from the common people for the fuel prices which have caused frustration among many people.

Automotive fuel is distributed as an essential commodity was freed from a government subsidy by the both Congress government and BJP government in 2010 and 2016.

Vehicle fuel inflation is not just a problem for vehicle use, but a subsistence problem that extends to the price of everyday consumer goods. The diesel was exempted from the state subsidy and the federal government paid for the transportation cost.

Regardless of the subsidy, the Union Minister’s insistence on the OPEC and OPEC+ importing countries to reduce the price of petroleum products and reduce the tax on the state government is a known evasion of central’s responsibility.

“The central government, which has cancelled subsidies on petrol and diesel, cannot expect tax breaks and will not be able to control fuel prices unless the cess is reduced,” said economist Jayaranjan.

“The central government will not subsidize petrol and diesel again. The subsidy is only for those who need it. Those who use automotive fuel will have the power to buy it. Therefore, they do not need the subsidy, ”the Union Minister said when the subsidy was removed, which showed the government’s view on the people.

The reality is that even though the central government says the gas subsidy will not be eliminated, the subsidy will not reach the majority of the population (the case subsidy has been reduced). The central government continues to hold the same view of the people, with cooking gas being sold where the price hikes twice in February alone for an average of Rs 860.