Petrol Price Rises To Rs 84.70 In Mumbai; Why Are Fuel Prices Skyrocketing In India?

Petrol prices continue to soar for the ninth day today, reaching a record-high of Rs 76.87 per litre in Delhi while the price of diesel touched an all-time high of Rs 67.82.

Mumbai has recorded the highest cost of petrol, Rs 84.70, followed by Rs 82.47 in Bhopal.

The last time petrol price had crossed the Rs 76 margin was in September 2013 when global crude oil was selling for about $120 a barrel. Currently, global prices are about $80 per barrel – which is higher than what it should be but lower than what it was five years ago.

Why is petrol price in India soaring?

US President Donald Trump’s decision to withdraw from the Iran nuclear deal has adversely affected petrol prices across the world, including in India. However, price hike by state-run oil companies cannot only be pinned on external factors. The taxes levied by the centre and state governments have also significantly contributed to this upward trend.

Presently, petrol is taxed a little over 100% and diesel at around 66.48%.

ASSOCHAM and FICCI have advised that the government cuts excise duty on petrol and diesel and, as long-term solution, considers including automobile fuel under GST.

According to News18, Rashesh Shah, President of Federation of Indian Chambers of Commerce and Industry (FICCI) said, “Unless swift action is taken to address the situation, the economic growth will again head towards a speed-breaker. Amongst the most immediate actions that can be taken by the government is to bring down the excise duty on fuel.”

The last time the centre cut excise duty on fuel was in October 2017. In the run-up to the Karnataka elections, the government had frozen auto fuel prices for 19 days but it resumed increasing prices from May 14 onwards.

The government hasn’t yet altered taxes despite a surge in international prices to fix its fiscal deficit. It expects to collect more than Rs 2.579 lakh crore by levying taxes on petroleum products, according to Business Today. This is a massive jump from the revenue collected in the fiscal of 2013-14 (Rs 88,600 crore). The collection in the last fiscal was Rs 2.016 lakh crore.

Soaring petrol prices across Indian states

As reported by PTI, petrol prices vary from state to state which are largely subjected to local sales tax and Value Added Tax (VAT). It must be noted that even though petrol prices in Delhi were increased by 33 paise a litre on Sunday, which pushed the earlier benchmark of Rs 76.06 a litre, the capital city’s fuel prices are cheapest when compared to other metros.

Petrol and diesel prices were increased between the range of Rs 3 to 34 paise per litre and 25-27 paise per litre across Delhi, Kolkata, Mumbai and Chennai.

This has also prompted the All India Petrol Dealers’ Association (AIPDA) to renew its demand of removing tax burden on fuel prices.

The Rupee-Dollar Nexus

India, which imports 80% of its oil needs at present, is particularly at risk considering that international petrol prices have had gone up from $78.84 per barrel to $84.97 on May 14, as reported by PTI. With further increase in international oil prices, NDTV Profit while quoting experts said that prices in India are expected to rise more over the course of time.

This hike was further propelled by the Rupee-Dollar forex which is one of the other determining factors of oil prices in India in addition to global crude oil rates. With the rate of rupee going down by more than 6% against US Dollar, the hike in oil prices is not uncommon, reports NDTV Profit.

Union Petroleum Minister Dharmendra Pradhan on Sunday told PTI that the increase in prices in India was a result of the lowering production of crude oil in Organisation of Petroleum Exporting Countries (OPEC).

As reported by media organisations, Pradhan, without giving out too many details, added that the government will soon try to come up with a solution for the problem which otherwise becomes a burden for the middle-class in India.