There has been a constant hike in the prices of petrol and Diesel in India, for the past month. This hike in the fuel prices has taken away the breath of a common man. Earlier there was a difference of 8 to 10 rupees between the prices of petrol and Diesel, but in the past three to four weeks that gap has been reduced to 30 to 40 paise.
Currently, the cost of both Petrol and Diesel has touched almost 80 rupees mark which has never been recorded in India’s history. The price of Diesel has reached its record high of 79.40 rupees, which is happening for the first time in human memory, in India. In April 2002 the Government of India deregulated the price of petrol and Diesel.
Deregulation in price meant that the amount would depend upon its demand and supply. It has happened for the first time that the costs of petrol and Diesel have increased by 8 to 10 rupees in a fortnight and that too when the nation and the entire world is facing the deadly consequences of COVID-19 and nationwide lockdown.
A few reasons behind the hike in fuel prices in India have been highlighted below. Please follow:
The first and the primary reason behind the hike in the price of fuels is the rise in global crude oil prices. India produces only 14% of fuel while it exports 86% of crude oil from other countries and that is why the dependency of India on other nations, for the export of fuel, is quite high.
A few months back, the price of crude oil was continuously declining and has reached 20$ per barrel, but now the countries are opening slowly, so the price has reached 40$ per barrel. This rise in the costs per barrel is one of the reasons for the hike in petrol and diesel prices in India.
The second reason is the Rupee-Dollar exchange. India pays other countries in Dollars, therefore, if Indian Rupee gets weaker in terms of foreign currency, then India will have to pay more, and eventually, it will lead to an increase in prices of fuels for us.
As in March, the value of Indian Rupee was 70 to 71 rupees per dollar, but currently, the amount of rupee is 75 to 76 rupees per dollar, and that is the reason which is leading to a constant decline in Indian Rupee against Dollar. Since India is paying a lot more in the purchase of crude oil, the same is leading to an increase in the prices of Petrol and Diesel.
The third and the most crucial reason behind the hike in the prices of fuels is the tax collected by the Centre government and State government individually. Petrol and Diesel do not lie under the purview of GST, so the Central Government imposes excise duty, and the State Government imposes VAT on the same.
All this leads to a rise in prices of fuels. It will be quite surprising to know that the actual value of the price is just the 1/3rd of its actual cost and the rest 2/3rd of it is collected as tax by the centre and the state. Therefore, tax results as the main reason for the hike in petrol and diesel prices. Also, due to lockdown, the source of revenue is limited. So the government is focusing on this to generate enough revenue.
The last reason relates to pandemic and its effect. Due to slow reopening of the economy, the demand for crude oil is increasing, which has led to an increase in price. Currently, the cost of crude oil is 40$ per barrel, and on the other side, the OPEC+ countries have decided to cut down the production of crude oil by 10 million barrels per day.
It is the prime law of the market that if the supply of any commodity is slashed and the demand of the same is on a hike, the price of that commodity is likely to increase rapidly. Thus, we are observing the prices of fuel in India amid the pandemic and nationwide lockdown.
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