The upliftment of lockdown over countries has caused the vehicles to arrive again on to the roads making them busy. By the statistics it is deduced that the prices of petrol and diesel which were noted as Rs 71.26, 64.7 per litre in May 2020 (lockdown period) has leaped up to Rs 91.17 and Rs 81.47 per litre on 4th march 2021 in Delhi respectively.

The current unprecedented steep rise in petrol and diesel prices in India can be attributed to two main reasons:

1. Rise in global crude oil prices

2. Excise duty on petrol

 

An ample analysis on how the preceding dual reasons are affecting the current prices and how the present trend might get shifted to the other end gradually in not more than one or two months is expatiated below.

The prices of these fuels remained either stable or went below in the lockdown as there existed hardly any demand for them in lack of commuting and transport. But post lockdown fuel prices began increasing due to demand. One of the reasons for the current steep hike in the fuel price is because of the rise in crude oil prices which has led to decrease in the production of former. It is claimed that the supply of crude oil has lowered as a strategy by the Organization of the Petroleum Exporting Countries to garner profits in the facet of revived demand succeeding lockdown.

Coming to the second reason; which is more important than the prior one is excise duty on petrol. Furthermore, the current prolonged increase in prices of fuels is conspicuously attributed to the second reason. Before comprehending the effect of excise duty on petrol, lets know what excise duty is.

Excise duty is a form of tax levied on some commodities produced within the country intending to discourage the purchase of those commodities. Excise duty is currently levied only on petroleum products and liquor.

Indian government has increased its excise duty by ₹13 and ₹16 per litre on petrol and diesel respectively between March 2020 and May 2020, and now stands at ₹31.8 on diesel and ₹32.9 per litre on petrol. The increase in excise duty is an attempt, in using the opportunity of falling international crude oil prices.

 

petrol and diesel prices
Credits: insights by inshorts

 

By understanding what excise duty is, it is benign to impose it on liquor but why on petroleum products too? We know the reason for the latter too which is to constantly remind us that frugal use of these fuels keeps our environment vivacious. But why has the government revised its excise duty to that astronomical digits in par with basic price? It is because as tax is one of the major continuums through which India can revive its economy by building its revenue deposits from lockdown-crisis, excise duty became a tool of it.

 

petrol and diesel prices
Credits: insights by inshorts

 

It is to be acclaimed here that the hike in petrol and diesel prices to all time high is due to government’s revised excise duty.

Ire of the raging poor and middle-class people may cool down soon with no more penury experiencing in the case of petrol and diesel. Since it is speculated by analysts that excise duty on petrol and diesel will be lowered by Rs 8.5 per litre. “And it is likely to get surfaced on or before 1stApril because then it will not have any negative impact on the revenue target of India” said by ICICI securities.

Also, the prices of these two fuels will be decreasing with the acknowledged introductions of tesla cars in India which are complete electrical vehicles and also Tata Motors which plans to price its electrical cars at “not more than 15-20% premium” to conventional petrol/diesel vehicles.

As Government rebates on electric vehicles, impulse creeps into e-vehicles resulting in fall of demand for fuel prices resulting in the price fall of automobile fuels.

 

References

https://indianexpress.com/article/explained/petrol-diesel-prices-rising-7192534/#:~:text=Crude%20oil%20prices%20have%20risen,sales%20taxes%20to%20boost%20revenues.

 

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1 thought on “Why Petrol Price Is Increasing In India Simplified 

  1. It’s better to go for electrical power sources which are key are future Automobiles.

    Tesla is doing great by introducing Electric based cars.

    Now India is there a platform where they excel and look forward to making an impact.

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