Why are petrol and diesel prices rising in India?
On Wednesday, petrol and diesel prices rose for the 11th consecutive day, reaching record highs in over a year. While petrol rates were hiked by 55 paise per liter, diesel rates went up by 60 paise a liter. The recent rate hike comes as crude oil rates have started rising again after hitting record lows of $20 a barrel. Here are more details.
What are the rates for petrol and diesel?
In Delhi, petrol and diesel prices stand at Rs. 77.28 per liter and Rs. 75.79 per liter respectively. Prices for other major cities are as follows: Mumbai: Petrol Rs. 84.15/L and diesel Rs 74.32/L. Chennai: Petrol Rs. 80.86/L and diesel Rs. 73.69/L. Kolkata: Petrol Rs. 79.08/L and diesel Rs. 71.38/L. Rates vary across states depending on the incidence of local sales tax or VAT.
Oil marketing companies started raising rates recently after 82-day hiatus
Wednesday marked the 11th consecutive day when fuel prices were hiked, starting June 7 when oil marketing companies (OMCs) started raising prices after an 82-day hiatus. Rate revision was frozen in mid-March after the government hiked excise duty on petrol and diesel prices.
When crude oil rates fell in March, government hiked excise
The hike on excise duty was imposed to increase the government's profits as crude oil rates fell. Crude oil rates plunged in March due to a reduced global fuel demand amid the coronavirus pandemic. Excise duty on petrol has been hiked from Rs. 20/L in February to Rs. 33/L, while the total incidence of excise duty on diesel has risen to Rs 31.83/L.
Consumers paid 70% in taxes amid reduced crude oil rates
The steep hike in excise duty kept consumers from benefiting from reduced crude prices and filled up the state's coffers. About 70 percent of the price paid by the consumer for a liter of fuel went into taxes (excise duty and VAT).
Why are retail rates increasing now?
In the months following March, retail fuel prices remained flat since falling crude rates were negated by hiked excise duties. Since benchmark Brent rates have sprung back, state-run OMCs have reportedly suffered losses of about Rs. 8 per liter of petrol/diesel they sell. Hence, OMCs have started hiking rates to retain profits and retail prices may continue to rise over the next few days.
