NEW DELHI: Amid growing concerns over soaring fuel prices, retail gasoline and diesel retail prices were raised again on Tuesday for the sixth time this month. This has caused prices to surpass 100 rupees per liter in locations from Nanded in Maharashtra to Rewa in Madhya Pradesh to Jaisalmer in Rajasthan.
The price of gasoline was raised According to a price announcement from state fuel dealers, it is 27 pa per liter and diesel by 30 pa per liter. The increase brought gasoline and diesel prices to the highest ever national level. In Delhi, gasoline now costs Rs 91.80 per liter and diesel costs Rs 82.36.
This was the sixth price hike since May 4th when the state oil companies ended an 18-day hiatus on interest rate revisions they witnessed during parliamentary elections in states like West Bengal.
Lack of uniformity in the price of fuel
In the land Fuel prices differ from state to state depending on the incidence of local taxes such as VAT and freight charges. For example, Rajasthan has the highest Value Added Tax (VAT) on gasoline in the country, followed by Madhya Pradesh. The Sri Ganganagar district in Rajasthan had the most expensive gasoline and diesel in the country at 102.70 rupees per liter and 95.06 rupees per liter.
In Rajasthan, gasoline exceeded 100 rupees in Jaisalmer (100.71 rupees) and Bikaner (100.70 rupees), while it approached that mark in Barmer (99.82 rupees). Gasoline in several districts of Madhya Pradesh, including Shahdol (Rs 102.06), Rewa (Rs 102.04), Chhindwara (Rs 101.67) and Balaghat (Rs 101.98), exceeded physiological mark. It approached this mark in Indore (Rs 99.90 per liter) and Bhopal (Rs 99.83). In the Nanded district of Maharashtra, gasoline was sold for 100.30 rupees.
How much have fuel prices increased in the recent past?
Fuel prices rose for the sixth time this month. In the recent past the price of gasoline has increased by Rs 1.41 per liter and the price of diesel has increased by Rs 1.63. After the gasoline price rose by a record 21.58 rupees per liter and the diesel price rose by 19.18 rupees since the government raised excise taxes to an all-time high in March last year, state fuel retailers cut the IOC, BPCL and HPCL Petrol price around 67 paise per liter and diesel at 74 paise per liter between March 24th and April 15th.
Factors Driving Fuel Prices In India?
Petrol and diesel are “uncontrolled” fuels and they are controlled by market forces. The retail price of gasoline and diesel in India is tied to global crude oil prices. India imports nearly 80 percent of its gasoline and diesel needs and 20 percent is exported. Therefore, gasoline and diesel prices in India are largely dependent on the prices of these fuels in the international market – rather than crude oil prices. Although international gasoline and diesel prices generally move in line with crude oil prices, this does not always have to be the case as the dynamics of supply and demand can differ.
As global fuel prices rise, the burden is passed on to the consumer, who has to cough more for every liter of fuel consumed. However, if prices drop, the government will propose new taxes and levies to ensure additional revenue is generated. In both cases, the government and the consumer are the real beneficiaries of the price control mechanism, and the fuel retailers bear the brunt of the burden.
Central taxes and duties
The excise tax levied by the central and state governments is another factor that can be blamed for the increase in fuel prices. It is noteworthy that from this point of view, the center and states combined have raised a whopping 14 billion rupees over the past three years. The center has changed the way these taxes are shared with states, which means that central government is now getting a bigger pie and states are in financial straits.
GST and price fixing
The The petrol prices are structured according to consumption tax + VAT. While the consumption tax is levied by the central government, the value added tax flows into the income of the state government. Central and state taxes make up 60 percent of the retail sales price of gasoline and over 54 percent of diesel. The union government charges Rs 32.90 per liter of excise duty on petrol and Rs 31.80 on diesel.
Formula of the finance commission for fixing fuel prices
The Finance Commission says states should get up to 41% of their excise duty share. However, due to the tax collection levied by the center, it receives a larger share of taxes so that states only have the option of levying their own taxes on fuel. This loss of excise taxes coupled with GST fees puts a financial burden on states, forcing them to levy additional state excise taxes and sales tax.
Cartelization by oil power supplies
Another factor influencing fuel prices is cartelization by three PSU oil companies that charge almost the same price despite differing cost structures and efficiency. State-owned oil marketing companies, including Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum, align domestic fuel prices with global crude oil prices by taking into account changes in exchange rates.
What is the government saying?
Union Minister for Petroleum, Natural Gas and Steel Dharmendra Pradhan recently stated that reduced fuel production and oil-rich nations seeking more profit were the main reasons for soaring gasoline and diesel prices in the country. The minister explained the reasons that the international market has reduced fuel production and the producing countries are producing less fuel in order to get more profit. This makes the consumer countries suffer.
COVID-19 impact
Justifying the taxes levied on gasoline and diesel, the minister said that post-Covid-19 pandemic the center and states are doing various development work on which they levy taxes, adding that these development projects will create jobs.
“Another reason is Covid. We have to do various development work. This is what the governments of the center and the state levy. The spending on development work will create more jobs. The government has increased its investments and 34 percent more investments are made in this budget state governments are also increasing spending, so we need this tax, but there is also a need for a balance, “Pradhan said.
As fuel prices continue to rise, transparent pricing based on market principles will certainly help consumers.
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