The dreadful year of 2020 marked by the pandemic pushed the Indian economy into a contraction. With shuttered economy and the imminent arrival of COVID-19 vaccines, the Indian middle class entered into 2021 with all hopes that new year will bring much-needed relief. However, the constant spike in oil prices is proving to be another misery and burning a big hole in the pockets of Indian households
The petrol and diesel prices have been increased 25 times with the two auto fuels increasing by Rs 7.22 and Rs 7.45 per litre in just 54 days of 2021. In just the last 9 days, the price has gone up by Rs 3.63 per litre for petrol while the diesel rate has risen by Rs 3.84 in the National Capital. The increase in the past few days has taken the price of petrol to a historic three digits mark in several cities of the country.
Meanwhile, Prime Minister Narendra Modi has blamed the previous government for the price hike, adding that if only earlier governments had focused on reducing India’s dependency on importing energy, the middle class would not have been burdened today.
On the other hand, Union Petroleum and Natural Gas and Steel Minister Dharmendra Pradhan said the reason behind the price hike is because of “less fuel production by manufacturing countries to gain more profit.”
Given the fact that India imports most of its requirements, Prime Minister as well as the Petroleum Minister are partially correct.
India is the 3rd largest importer of crude oil in the world after China and the USA. It imports nearly 85% of its crude oil, making it more vulnerable to the rise in domestic prices of petroleum products to global fluctuations.
However, this is not the only reason. The excise duty and the state government’s Value Added Tax (VAT) also add up to the final charge paid by the end consumer.
Last year in April, when the global price of crude oil was $18 per barrel due to the low demand caused by pandemic, the Indian government raised the excise duty on petrol to Rs 32.98 per litre from Rs 19.98 per litre, while on diesel, the excise duty was increased from Rs 15.84 per litre to Rs 31.83 per litre. The state governments also increased VAT during the same period to shore up its revenues
Come 2021 and international price of crude oil has crossed $60 per barrel, because of increased demand. However, with this increase in the global price, the Indian government has not slashed any taxes to transfer the benefits to the end consumer.
Oil companies executives on Tuesday told IANS that petrol and diesel prices may increase further in the coming days as retail prices may have to be balanced in line with global developments to prevent OMCs from making a loss on the sale of auto fuels.
At the same time, there are no hopes of global oil prices seeing a downward trend in the near future. Therefore, it is in the hands of the government to provide the much-needed relief to the middle class as each day becomes unbearable for them.