FUEL PRICE HIKE IN INDIA

INTRODUCTION:

The rising fuel increases the burden on Indian citizens, which successively also affecting the government’s popularity to some extent. very often it also brings into question the government’s policy when it involves taxing basic fuels. quite half the cash that's paid by the buyer goes to the govt within the sort of taxes. Some posit that the govt might compromise on its fuel deregulation policy, which allows oil marketing companies (OMCs) to cost their output freely.

But the hike in petrol price successively features a rippling effect. As a bulk of the commodities are transported across India on vehicles that run on petrol or diesel, so an increase in petrol price leads to the price rise of those commodities also. the best sufferer here may be a commoner. he's already bearing the burden of inflation and an increase in the petrol price will further reduce his actual household income. Today every commoner spends almost half his income on food items. If the petrol price in India rising in this manner then every food item will get costlier. it'll end in less of savings and more of expenditure. This may successively have chain affect to the important estate, banking and other sectors in India. Eventually, more and more people are going to be plunged into poverty. In this backdrop, an effort has been made to analyse critically the implication of recent spurt in petrol and diesel prices to the Indian economy.

The main reason behind this sudden surge in petrol prices is that the government has not taken any steps to curb the increase in petrol prices. But now there is a new initiative which has been launched by the government of India called 'fuel price reduction program'. This scheme aims at reducing the petrol prices by 25% from Rs. 1, 000 per litre to Rs. 1, 500 per litre for every litre of petrol and Rs. 2, 000 per litre for every litre of diesel S. But this seems to be just a glimpse for India as again in the present-day Fuel prices are just rising like Sun and there is no decrement acan be expected on a long run.

Earlier, the worth of petrol and diesel in India was regulated, i.e. the govt was solely responsible within deciding the retail price. the govt started deregulating the pricing of petrol in 2010 and diesel in 2014. This allowed oil marketing companies to work out the worth of these products, and revise them in nightly. Although profit-earning capacity has grown up steadily to the private sector companies compared to the general public sector companies in recent years. Before 2015 the image was different but after 2015 profit of public sector oil companies (ONGC, OIL, GAIL) shows declining trends whereas private sector oil companies (RIL, NEL) show a gentle growth.

Petrol prices in India are currently at a 19-month high, while diesel is selling at its highest rate ever in some parts of the country. the costs of liquefied petroleum gas, which is employed for cooking and engine fuel, have also been raised twice in two months. These rate increases are despite the very fact that global petroleum prices are off their highs.'

Taxes on the 2 fuels now account for nearly two-thirds of what Indians pay at the pump, making Indian retail prices among the very best in Asia and almost double that in neighbouring Pakistan. The recovery in global crude prices, meanwhile, has boosted Indian fuel costs even further within a previous couple of months.

The high prices are adding another headwind to an economy facing the most important contraction in four decades. Diesel powers India’s trucking fleet, which carries two-thirds of the country’s freight, and is additionally essential for construction and agriculture. Gasoline, meanwhile, fills the tanks of many motorbikes ridden by lower-income Indians.

This price rise comes whilst the Indian crude basket is seeing low prices. Priced at $71 per barrel at the beginning of FY 2019-’20, it stood at only $40.83 per barrel as of July 28, 2020 - a drop of quite 42%.

Excise duty on petrol and diesel was hiked by Rs 3 per litre last month and therefore the special excise duty on petrol was hiked by Rs 2 to Rs 8 per litre just in case of petrol and to Rs 4 in case of diesel. Additionally, road cess was also raised by Rs 1 per litre each on petrol and diesel to Rs 10. Though the govt is trying to form the foremost out of the rising crude prices, it's not expected to form a big difference to the financials.

Why Fuel price is not falling in India?

Global crude oil may have crashed historically but the truth is India is not getting any benefit from this. Brent crude prices fell to a historic low at $16 per barrel in April which means it has fallen 39% so far but in India fuel price has remained flat at Rs76.31 or $1 per litre in the month of April and diesel price in the cities were unchanged too.

While Brent crude prices have been on a downward trend since January, the Narendra Modi government has only sought to maximise the windfall. On March 14, it increased the excise duty on petrol and diesel by a maximum permissable Rs 3 per litre each to shore up an additional Rs 39,000 crore. In the following week, the government passed an amendment to India's finance bill, givinh it powers to increase the excise duty by an additional Rs 8 per litre in future.

The main cause behind not decreasing the fuel price by Indian Government is taxes. A large part of petrol, diesel retail prices in India constitute taxes. Over the years, the government has steadily spiked these tasxes to increase revenue. The excise duty on petrol is up to Rs. 22.98 per litre, while on diesel it is Rs 18.83 per litre. this represents a 142% in increase in duty on petrol since April 2014 and a 318% increase on diesel.

The subsidy extended by the govt of India on petroleum products, budgeted at Rs 41,000 crore for the present fiscal year 2020-21, forms the littlest component of major subsidies, hence, any savings on this front will pale as compared to the expected loss of tax revenues during the lockdown period, Aditi Nayar added. On June 24th, for the primary time in living memory, diesel was sold at a better price than petrol. Bear in mind, this only happened in Delhi, but it had been still a sight to behold.

CONCLUSION:

The sharp rise in fuel taxes may be a result of government compulsion. Revenues from the products and Services tax are falling hard-hitting both the Union government also because of the states. GST revenues within the half-moon of 2020-’21 are 41% lower compared to an equivalent period within the previous year. However, the present Indian economy is in an unusual place thanks to very low demand, which serves to ease inflation pressure. for instance, the Federal Reserve Bank of India argued in its May Monetary Policy board meeting that there was a “meltdown in demand” which was “likely to end in a big easing of price pressures in core goods and services”.