• Shiv Bhatia

Rising global crude oil prices and an improved demand outlook for petroleum products due to the prospects of a viable vaccine for Covid-19 are the key reasons behind the recent rise in the prices of petrol and diesel, according to experts.

This surely stands true and factually right for the globe, but not for India. The reasons for price hikes are, simply, extracting exorbitant tax revenue from the citizens of the country to silently gain enormous amounts of money for the government’s personal spends or hidden expenses.

Prices of essential fuels like petrol and diesel have been rising in the country since months. If noticed, they become stable for a week and then the strategic increase begins once again. Month-on-month, the trends show this unjustified increase; eventually blaming Covid19 or other economic factors.

The rates have already touched a 2-year high and could increase further as global crude oil rates rise.

A litre of petrol now costs even above Rs. 90 in some Indian cities. Diesel prices have also increased sharply, well-above Rs. 80 in cities.

The fresh hike in petrol and diesel prices could pose a major challenge as India’s economy looks to recover from the damage inflicted by the Coronavirus-induced economic slowdown.

There are two possible explanations as to why fuel prices have been rising in the country — Increase in global crude oil prices and higher fuel taxes levied by the Central and State governments.

Honestly, if we map the fresh rise, it is clear, simple, so strongly stated that the reason is higher taxes being levied by the government.

Just over two weeks ago, fuel prices started rising in India. And few days ago, Brent crude oil price rose to its highest level since March.

As the situation stands, petrol and diesel prices have now touched a two-year high. In Delhi, a litre of petrol costs Rs. 83.71, only less than those prevailing in Chandigarh and Gurugram. At least 11 other prominent cities have petrol rates higher than the national capital.

Going back to an era of actual economics led by Dr. Manmohan Singh, every raise or fall, had a justification. Every step taken had been strategically planned and whether an economist or a lay man, who ever raised questions, was answered with crystal clear logics.

Contrasting is the government today, a scenario of confusion, and doubt even within the Finance Minister’s team, who are claiming to lead our country in a beneficial direction, but the reality is, they don’t have a direction paved yet.

The economic trends and financial agendas are so out of place that anything and everything is used as a blame to cause increase in oil prices. Inching towards all-time high, the price of petrol and diesel, and gas too, have caused the Indian citizens to really fall helpless and stranded, in the fight of either earning, to afford petrol or diesel, or rather, being safe from the spread of Covid.

Global scenario:

Coming back to global crude oil prices. In 2018, the commodity was priced at almost $70 per barrel, much higher than what it is right now. In 2019, crude oil prices were at $60, which was still higher than what stands today.

The shocking average price of a barrel of Brent crude oil, in 2020, stood at $40, and yet we, as a country have a rising graph of the INR price of petrol and diesel.

In the USA, it is fortunate rather, to know that the price of gasoline (fuel) is USD 0.686 as of today, which is much lesser than the INR price prevailing in our country. Is it even justified to really charge the public on something as basic as fuel and load them with the burden of tax, just for covering up the loss of revenue of the government?

It is surely, justified to ask, why are the petrol and diesel prices reaching all-time highs when global rates are well below? Higher taxes charged by the Centre and states could be the answer, only if correctly given.

There is a Tax pinch, a wave of distress and a worry, in every citizen who is affected by transport directly or indirectly.

Consumers should note that a bulk of the fuel cost they incur goes towards taxes. High level of excise duty and tax, contributes to 63 per cent of petrol and 60 per cent of diesel costs. So, the taxes you pay on petrol roughly exceed Rs. 50 per litre, while for diesel it is over Rs. 40.

The tax pinch was not felt in the earlier months of the lockdown as global crude prices collapsed completely, leading to a drop in fuel prices. However, as global activity increases, crude oil prices are also on the rise. Therefore, the higher taxes are now becoming more prominent with every upward revision in prices.

A report suggested that excise on petrol and diesel has grown sharply even as overall tax receipts fell. It said that the Central government’s receipts from excise duty, a bulk of which is generated from petrol, diesel and crude oil sales, has shown a sharp 40 per cent year-on-year rise.

While higher fuel taxes coupled with a sharp fall in global oil prices has helped the government somewhat make up other revenue losses, these taxes now pose a larger inflation risk, according to experts.

Tax-high energy consumption would not only increase inflationary pressure but may prove counterproductive if demand collapses under price pressure. At present, India’s retail inflation is close to a seven-year high of 7.6 per cent. Food inflation is already in double digits and rising fuel costs could further increase your grocery bill.

The resentment over rising fuel prices in India seems to be growing and the government seems to be under pressure to reduce fuel taxes. However, it may have little room at the moment considering the weak revenue generation from other avenues this year.

It is unfortunate that the revenue losses of the government are not being regained by the apparently so competitive government, but rather all the pressure is being laid on to the citizens of our country.

Anything over Rs. 40/ltr for petrol is monumental exploitation, says Subramanian Swamy, who is himself an economist politician, siding the ruling party, yet, stating such facts.

To add on to this information bucket, it must not be missed out that State oil companies have hiked the rates of cooking gas by Rs. 50 per cylinder, the second rise in a fortnight, making the fuel dearer by Rs. 100.

This is the biggest ever monthly rise for cooking gas in the country; especially at a time most consumers aren’t receiving fuel subsidies. The cumulative price hike for a customer eligible for subsidy in the country has been Rs. 197 since June last year.

Cooking gas price has risen to Rs. 694 per cylinder in Delhi from Rs. 644.

A route map to the economics of this country must be designed and rather put out in public, if the government’s decision-making is considered so apt. However, the government believes in secrecy, and only implementation, not discussions or education of such strategies or factors, which may lead all citizens to be fighting for basic food and amenities, very soon.

Author is a AICC Member