Why Isn’t the Indian Govt Slashing Fuel Prices?

The retail price of petrol is more than double the basic price of the fuel thanks to steep duties and taxes. 

Car and Bike
2 min read

Video Editor: Kunal Mehra
Cameraperson: Shiv Kumar Maurya


Petrol and diesel prices have hit lifetime highs in India – in Delhi, petrol as of 24 May 2018 is Rs 77.51 a litre (it was Rs 77.13 on 23 May), while diesel is Rs 68.57 a litre (it was Rs 68.30 at BPCL pumps on 23 May 2018).

In the past one year, petrol has gone up over Rs 10 a litre and diesel has gone up by more than Rs 12 a litre. And there’s nothing you can do about it. Or is there?

You see, let’s first talk about why are petrol and diesel prices continuing to rise? Why isn’t the government doing anything to ease your pain?

Since petrol and diesel prices have be deregulated and allowed to fluctuate with the price of oil, it’s simple economics right?

Crude prices are rising for a number of reasons – the US president pulled out of a nuclear deal with Iran and is slapping sanctions which will affect oil supply. Venezuela has a supply shortage because of ageing infrastructure. And the oil cartel, OPEC, has been cutting supplies to shore up prices to help the Saudi Arabian economy.

India is dependent on oil imports for petrol and diesel. Over 80 percent of crude oil is imported. But it’s not just crude prices. In fact, crude prices are still not near the highs of 2012-2013, when it touched $118 a barrel. Yet, our fuel prices are the highest ever.

The real reason is excise duties and taxes. Since 2014, the central government has hiked excise duty on petrol and diesel nine times, and cut it just once in October last year.

We explain what the tax component of fuel is in this video and how much of a cushion the government has to cut taxes.

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