Petrol Price Touches All-Time High, Pradhan Blames External Factors for His Failure, Taxes in Fuel Higher than Base Price

Bhubaneswar: The price of petrol continues to rise to a new all time high of Rs. 78.02 a litre, an increase of Rs. 0.42 over previous day, in Bhubaneswar on Monday.

According to the data available at IOCL, there has been an increase of Rs. 7.59 in last six months in Bhubaneswar.


Similarly, petrol is being sold at Rs. 86.56 a litre (increase by Rs. 0.58/litre) in Mumbai on Monday. The last all-time high witnessed by the metropolitan city was Rs. 86.06 on 1 September. In Delhi, the petrol price touched Rs. 79.15 per litre — increase by Rs. 0.31/litre.

Diesel, too, hit a new high of Rs. 75.54/litre (up by Rs. 0.44/litre) in Mumbai and Rs. 71.15/litre (up by Rs. 0.39/litre) in Delhi today.

While the Union Petroleum and Natural Gas Minister Dharmendra Pradhan, however, on Sunday blamed “external factors” for the rise in domestic prices of petrol and diesel, the tax imposed on fuel prices is more than its base price.


Talking to reporters on the side-lines of a conclave organised in Surat, Pradhan said that the factors responsible for the drop in production of crude oil have caused a spike in fuel prices in India. “I would like to mention two points, and both these subjects are external. OPEC (Organisation of the Petroleum Exporting Countries) had promised that it will raise production by 1 million barrels per day, which was not raised.

Earlier the fuel prices were revised on 1st and 16th of every month, however starting from mid-June last year oil companies dumped the practice and instead the fuel prices are now being revised every morning and come in effect from 6 am.

The effect of rising crude oil prices in the global market has also contributed to the weakening of the Indian Rupee which sank to Rs. 71 per US dollar days ago.

In 2014, one of the favourite hit-Congress themes of the Bharatiya Janata Party (BJP) supporters on social media at the time was the coinage of a new greeting: “May your happiness increase like petrol prices, may your sorrow fall like the Indian rupee.” Top leadership of the BJP then, including Narendra Modi, took pot-shots at the Manmohan Singh government over fuel prices.

The wheel has come full circle now. Now it’s the turn of Prime Minister Narendra Modi to be at the receiving end as retail prices of petrol and diesel are at the highest level ever.

This brings us to the crucial question about the efficacy of the policy of fuel price deregulation, introduced by the Manmohan Singh government in June 2010, which has been repeatedly used by the Modi government for refusing to intervene and order excise duty cuts in prices of petrol and diesel.

The only logical conclusion one can derive from this is that the government intervenes only when it wishes to and when it’s politically expedient, like it was at the time of Karnataka elections. Another logical inference is that the government will continue to look the other way (or indulge in some window dressing by ordering a minor duty cut) because there are no elections lined up till the year-end. After all, the Modi government has to build up its war chest for the all-important 2019 General Elections.

This makes it clear that the spurt in external factor is not the only reason for domestic retail prices to touch record highs. The government’s hard-nosed policy to keep the tax component on petroleum products high is the real reason. Since 2014, the Modi government has increased excise duty on petrol and diesel more than 10 times and the total quantum of excise duty raised during this period is Rs. 19.48 per litre on petrol and Rs. 15.33 per litre on diesel as on today (As per IOCL website as on 03.09.2018).

The only instance when the Modi government had cut excise duty on petrol and diesel by Rs. 2 per litre was in October 2017 at a time when the Uttar Pradesh Assembly polls were round the corner.


As per Indian Oil Corporation’s price build-up data for fuels, the total tax component charged from consumers stands at 50.46 per cent for petrol at Delhi. The Tax component is lower in Delhi in comparison to other states as Delhi Government has slashed VAT on the fuel. If we consider the tax component in other states like Maharashtra it would be much higher. India is the most taxed nation in terms of petroleum products among all South Asian nations.

This brings us to another crucial question: Why hasn’t the government included petrol and diesel in the Goods and Services Tax (GST) regime? The reason is obvious. Under GST, the maximum tax slab is that of 28 per cent whereas the government is collecting much higher taxes by keeping petrol and diesel out of GST. This obviously puts a question mark on government’s intentions.

If the government were to do this then at the maximum tax slab of 28 per cent, the per litre retail prices of petrol and diesel would come down to Rs. 50.18 so far as petrol is concerned.

The government’s refusal to provide any relief to the common man has invited sharp attack from the Opposition as well as the common man, which is reflected in the social media. #FuelLootBySuitBoot handle trended on Twitter Sample a few tweets, some humorous, some satirical, some jocular but all of them hard-hitting:

Rising fuel prices are a major headache for the Modi government. Its political fallout could be as grave as that of the government’s lacklustre performance in terms of generation of jobs and virtually all other sectors.

The worse is, however, yet to come since international oil prices are likely to rise further.

This makes Pradhan’s task all the more complicated, challenging and politically riskier. Petrol/diesel prices affect the common man directly. Dharmendra Pradhan’s dispensation has to act fast. Time is at a premium. Failure to do so will severely dent Modi’s Mission 2019.

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