Explained: Rising fuel prices and how it is affecting the "Aam Janata"
Government has constantly increased taxes on fuelSakal Media Group

Explained: Rising fuel prices and how it is affecting the "Aam Janata"

Petrol prices in India have been on a constant rise just like the number of coronavirus cases. In October, fuel tax increased by 200 per cent.

Petrol price, excise duty and crude oil price in 2014 with comparison to 2020

Petrol prices in India have been on a constant rise
Petrol prices in India have been on a constant riseTBC Design Team

This is a 266 per cent increase in excise duty on fuel by the central government. Looking at the numbers, technically fuel prices should have come down drastically, but that is not the case.

The above-mentioned numbers tell us the story of how the Modi government has constantly increased taxes on fuel ever since it came to power in 2014.

Petrol prices in India have been on a constant rise just like the number of coronavirus cases. In October, fuel tax increased by 200 per cent, which means taxes are double the price of what dealer charges.

Lets first understand the different components of fuel price in India. There are four components -

Components of fuel price in India
Components of fuel price in IndiaTBC Design Team
  • Dealer Price (OMC's like BPCL, HPCL)

  • Excise Duty (Central government)

  • Dealer Commission (Petrol pump owners)

  • Value added tax (state government)

The dealer price is usually affected because of factors like global crude oil prices, freight charges, etc.

Excise duty is levied by the central government. Excise duty on petrol before March 2020 was Rs 19.98 which was later increased to Rs 22.98 in March and after two months in May, the central government levied Rs 32.98 of excise duty on petrol.

The central government increased the excise duty on petrol by a whopping 65 per cent within just three months of the lockdown. You will be shocked to know that excise duty on petrol in 2016 was just Rs 9.48 per litre.

The dealer commission is paid by the OMC's to the petrol pump owners. This is usually a mere amount of around Rs 1-3 per litre.

Value-added tax (VAT) is levied by the state government, hence this is the reason why we get fuel of different price in various states. Maharashtra levies highest VAT of 39.12 per cent on petrol.

As the economy is at its all-time low, gross tax revenue has also come down by 23.7 per cent to Rs 5.04 lakh crore. The only tax which has hiked during the pandemic is the excise duty. Excise duty has grown by 32.05 per cent, that is a whopping Rs 1 lakh crore. This is mainly because of the duty levied on fuel.

In March, the government increased the excise duty on petrol by Rs 3. Later in May, the government then increased the duty by Rs 10 on petrol and Rs 13 on diesel.

In March, the petrol price excluding taxes was Rs 32.93 and including taxes, it was Rs 71.71. If we compare this to October, 1l of petrol excluding taxes was Rs 25.68 and including taxes, it was Rs 81.06. Which means, the dealer price of petrol was less by Rs 7 in October, but still, the 'Aam Janta' was paying Rs 81.06 for one litre of petrol.

One barrel of crude oil in March was $55, whereas, on October 1, it was $41.

All the above-mentioned figures necessitate us towards one question. Why are we paying so much extra?

In March, the government levied a tax of Rs 35.23, today the tax is Rs 51.69. In March, 49 per cent of the money that we used to pay for 1l of petrol used to go to the government. Today, we are paying 64 per cent of the cost to the government.

If we talk about our neighbouring countries like Pakistan, Nepal, Bangladesh and Sri Lanka. All the neighbours sell fuel at a much cheaper price. In fact, India is a major exporter of oil to Nepal. Still, Nepal manages to sell fuel at a much cheaper rate. Fuel prices in neighbouring countries -

 Fuel prices in neighbouring countries
Fuel prices in neighbouring countriesTBC Design Team

Let's compare the crude oil prices and taxes on fuel when the Modi government came into power in 2014.

In 2014, a barrel of crude oil was USD 106, now in 2020, the same crude oil barrel is of USD 41. In 2014, the tax on petrol was Rs 9.48, while in 2020 the Modi government has increased it to Rs 32.98.

The similar story is with diesel prices. In February, the dealer price for 1 l of diesel was Rs 15.83, the government then increased it by almost Rs 3 to Rs 18.58. After two months into the lockdown, the government increased the excise duty on diesel by Rs 13 to Rs 31.58.

Demonetisation, GST, Make in India, was meant to be a big success in India, so why is our economy getting worse now? It is high time we overcome the issues that are least important and pay heat to how the government policies have been exploiting the "Aam Janta".

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