ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Politics of Inflammatory Oil Price Rise

Convoluted petrol and diesel taxes only fill central coffers at the expense of consumers and states.


Why do oil prices always go up but hardly ever come down? It is a riddle that both puzzles and irks most people. And this has been especially so since oil companies have been allowed to fix prices on a daily basis since June 2017 to reflect global price trends. And the current spike has been particularly severe as petrol and diesel prices have unremittingly soared by around 29% in less than a year. In Delhi, the capital city, retail prices of petrol and diesel went up from a low of `69.6 and `62.3 per litre in mid-April 2020 to touch a high of `89.9 and `80.3 by mid-February 2021. ­Normally, retail oil prices fluctuate up and down every few weeks or in one or two months. But this time, the upswing has been lengthy as the price of oil imports has steadily shot up from $19.9 per barrel in April 2020 to a high of $54.8 in January 2021, claim the oil companies.

But links between domestic retail prices of petrol and diesel and crude oil prices in global markets are very tenuous. The reality is that the price charged by oil companies to retail pumps is only around a third of retail prices of both petrol and diesel. The rest, that is, close to two thirds of the retail prices are mainly contributed by taxes. And this is without accounting for the 2.5% customs duty and 3% social welfare surcharge on crude oil imports, which will push tax share in total retail prices of petrol and diesel even higher.

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Updated On : 28th Feb, 2021
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