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Published on: June 28, 2021, 9:20 a.m.
Fuel prices go up, up and away
  • Every time there is a hike of Rs1 on excise of petrol and diesel, the exchequer gets about Rs13,000 crore; Photo: Palashranjan Bhaumick

By Yeshi Seli. Assistant Editor, Business India

The rise in the price of international crude, the devaluation of the rupee and the high tax regime (because of the expenditure on the vaccination drive) of the Centre and the states have contributed to the increase in the prices of petrol and diesel. In six states across India (Rajasthan, Madhya Pradesh, Maharashtra, Andhra Pradesh, Telangana and Karnataka), as also the Union Territories of Ladakh and Jammu & Kashmir), petrol has already crossed the Rs100 mark.

There have been close to 27 hikes in the cost of petrol and diesel since 4 May 2021. “At present, while the earning is low, we still cannot compromise on expenditure – as the expenditure on health has increased,” says Dharmendra Pradhan, Union minister for petroleum and natural gas, supporting the hike which is partly due to the vaccination drive.

“Every time there is a hike of Rs1 on excise of petrol and diesel, the exchequer gets about Rs13,000 crore,” explains an official from the ministry of petroleum & natural gas. “It could be lower due to the Covid-related decline in consumption.”

The Prime Minister had earlier stated that all Covid-19 vaccines would be procured by the government and given to the states for free. This is likely to cost the Centre about Rs45,000 crore. A major part of this will come from the taxes collected from petrol and diesel.

How the cost is arrived

To get an idea of how the cost of one litre petrol is arrived at, let us take the cost of petrol prevalent in Delhi from mid-May. According to sources, the per litre cost of petrol was about Rs92.58 per litre, of which the base price was Rs34.19, including a freight levy of Rs0.36. The excise levied on that was about Rs32.89, the dealer commission Rs3.77, while VAT came to Rs21.36. These taxes and levies combined gave a price of Rs92.58 (in May). The cost of petrol in Delhi is Rs97.22 a litre, while diesel is priced R87.97 per litre. In Delhi, the state and Central taxes account for about 57 per cent of the cost of petrol and 51 per cent for diesel. 

Meanwhile, the price of crude has risen by 37.1 per cent to about $71 per barrel, at present, from $51.8 per barrel in January this year. The prices of petrol and diesel are based on a 15-day average of the international prices. However, the price of petrol and diesel are higher now than in 2014, when the cost of crude was over $105 per barrel.

According to the Petroleum Planning and Analysis cell (PPaC), the consumption of petroleum products during April-May 2021, at a volume of 32.1 million tonnes, grew by 30.1 per cent, compared to the volume of 24.7 million tonnes during the corresponding period of the previous year. “Except LPG, SKO and pet-coke, all the petroleum products reported a growth in consumption during April-May 2021, compared to the corresponding period of the previous year,” says the PPaC.

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