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In Focus

September, 13

Petrol Price Hike: Achhe Din for whom?



The sky rocketing of fuel prices in India is going to affect each and everything that we use in our day to day life. The cascading effect on transportation and further on daily commodities will affect the people lower down in the economic strata. In the past three years, fuel prices have been increased several times. Not because of increasing crude prices, which have been falling. But because of increase in taxes by the BJP led NDA government. This usurious extraction via taxes on a basic commodity shows that the Govt of the day is not in sync with the needs of the economy and the people.

Ever since the government initiated the dynamic pricing system where fuel prices are being raised every day rather than every fortnight. The increase in price has been particularly marked in Delhi, Chennai, Mumbai, and Kolkata. On June 16, 2017, petrol cost was Rs 65.48 per litre in Delhi. But today, it costs Rs 70.30 per litre. Similarly, in Mumbai, on June 16, petrol cost Rs 76.75 per litre but as of September 12, it costs Rs 79.41 – the highest since August 2014. Kolkata and Chennai, too, are paying Rs 7 more on petrol than they were paying in July. On the other hand, the price of diesel has also risen by Rs 5 per litre since July 1. The parable of the frog being boiled alive comes to mind.

It is understood that the foremost reasons being the unreasonable hike in fuel prices in spite of the crude oil prices hitting an all time low are TAXES. The central government has been consistently hiking excise and other levies to increase its tax kitty. The total levy on diesel is Rs 17.33 per litre and for petrol, it is Rs 21.48 per litre today versus Rs 3.43 per liter for diesel and Rs 9.20 per liter for petrol in November 2014 which is equal to a hike of 400% and 133% on diesel and petrol respectively.

The state governments also use Value Added Tax on fuel to increase tax revenues. The immediate effect was the highest rise in oil prices in three years in many of the states in the country, following a sharp rise in central excise tax and VAT. Petrol price in Mumbai rose to its highest since August 2014 while diesel prices reached their peak since August 2014 in Kolkata and Chennai. Since July 1, petrol price has climbed Rs 5.18 per litre in Mumbai, and diesel by Rs 5.75 per litre in Kolkata, and Rs 5.71 per litre in Chennai.

Tamil Nadu government increased Value Added Tax (VAT) on petrol to 34% from 27% and on diesel to 25% from 21.43%. Prices have gone up by ₹3.78 per litre for petrol and ₹1.70 for diesel. Petrol price in the state of Maharashtra has increased by Rs 3 as VAT rate is hiked by the state government. In Delhi, VAT on petrol has been raised from 20% (2014) to 27% (2017) and VAT on diesel has been increased from 12.5% (2014) to 18% (2017).

In practice, the recent price spike is expected to result in enormous gains for oil companies who while charging higher fuel prices also benefited from lower crude rates. Instead of passing falling prices of petroleum products in the international market, BJP led NDA government keeps on fleecing the people via increased taxes. Who is achhe din for exactly?

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