Oil. The most sought after commodity of the 21st CE. And the most popular products made out of it - petrol and diesel. These fossil fuels have propelled some nations into prosperity while compelling others into War. It is impossible to measure the lives lost for this.
But, what is measurable, is the constant rise in petrol and diesel prices in India. Even when crude oil prices are falling globally. Confused?
So were we.
Recently, the price of petrol and diesel continuously increased for 22 days straight!
So, why this price hike? What influences fuel prices in India? And what does it mean for us, the common man? Read on.
Breaking It Down
In April, crude oil prices in the United States plummeted to record lows, going into negative territory. Yes, negative. Below zero. Here’s an audio explaining why this happened.
India imports 84% of the crude oil it consumes.
So, a fall in prices around the world should lead to a fall in prices in India, right?
Wrong.
While crude oil prices the world over were tumbling, the price of fuel in our country did not move much. Take a look:
But, why? This is defying all logic!
Well, perplexed, we decided to drill a little further and look at what exactly constitutes the price of petrol in India. We found this:
That’s right. More than half of the fuel price is, well, taxes! The Central Government imposes an excise duty and the State Governments levy Value Added Tax (VAT) and other charges on the sale of fuel.
In 2018-19, 80% of the total amount earned by the Central Government through Taxes and Excise Duty came from petroleum products. Basically, taxes on fossil fuel is what fills the government’s tax coffers. When the prices for fuel crashed around the world, the benefits did not pass on to us, the common man. It only increased the government’s revenue through an increase in taxes (supposedly by ~ INR 1.60 lakh crores).
Heads They Win, Tails We Lose
What happens when fuel prices in the international markets rise? Does the government reduce its taxes? You wish so. The burden of international prices rising is passed on to the consumer, while the benefit of a fall is not. A classic case of chit bhi meri, patt bhi meri!
An increase in fuel prices directly impacts us as consumers.
Cost of transporting goods increases and this additional cost is passed on to us in the form of higher prices charged for the same product, thereby leading to inflation.
The Virus has made us wary of public transportation, while the increase in fuel prices has made private travel non-affordable. Add to that the plight of those who have had a pay-cut, or worse, lost their jobs. Businesses are shutting down, and even transporting essentials is becoming too costly.
For the common man, it’s like “Heads They Win, Tails We Lose.”
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This write-up is the work of a 17-YO Adhya Tejas. An undergrad, pursuing Bachelors in International Finance, she loves quoting Arya Stark - "Fear cuts deeper than swords." Writing is her passion, and she has taken part in a myriad of journalism fests. She also loves travelling and is an ardent F.R.I.E.N.D.S fan.