India is a country of inflation. Here, the customers are always entitled to higher sums of money for buying at least one essential commodity. However, this time an unexpected increase in prices of Diesel are stealing the headlines.
The 24th day of June 2020 marked the historic event when the prices of Diesel steeped and became more costlier than Petrol. This achievement of topping the unwanted tally was achieved in Delhi. Petrol and Diesel prices have jumped by Rs 8 and Rs 10 respectively for the last 3 weeks.
The consumers took a jibe on various social media platforms to express their anguish.
Global prices tells a different story
Diesel is though is the most expensive autofluel, owing to its production, transportation and distribution charges. About 84% of countries of the world have either almost equal petrol and diesel prices or diesel prices slightly greater than petrol prices. But in India, catering to the needs of the agricultural and transportation sector, the government has kept the tax rates low on diesel than petrol to keep it into the reach of users.
Are the surcharges responsible?
This unexpected increase is due to various reasons. The first and foremost reason attributing to this increase is the non-uniform taxation system in India. There are states and UTs such as Delhi, which have imposed a hefty 30% VAT on Diesel prices from 16.5%. Whereas in some other states, it's still quite low as 18%. This unanimous increase in VAT was made on May 5, stating the less revenue collections during the lockdown period. Additionally, Diesel also includes an airways transportation cost of Rs 250/kilolitre.
Are Oil Companies running an absolute monarchy?
Another reason includes the autonomous decisions of Oil Companies in India and a soft corner for them by the Government. During the tenure of March 16 to June 7, international prices of Brent Crude(raw oil) dropped down by $20/barrel. But, the oil companies took it as an opportunity and stopped revising prices during this tenure. This decision was blindly supported by the government from the backend, and was against the decision of revising the oil prices every morning according to international market. Had it been so, Indian consumers would have been benefitted by cheaper oil prices. Additionally, the current hike might not have bothered them much. But, the government gave the companies a free hand and thus no reduction of oil prices took place during the lockdown period. Currently, when prices of Brent Crude in the international market are touching $42/barrel, consumers are again being subject to financial harassment.
Why isn't the government intervening?
Since 2014 after deregulation of Oil prices, Centre has increased the excise duty on petrol by 258% and on Diesel by 820%. It is also a matter of suspicion that when every single commodity is now levied under single taxation system GST, then why oil is still not included in the list? Also, during the lockdown period, the government increased the fuel duty by 250%. Thus no gains reached to the consumers. The dominance of Oil Companies clearly reflects here and despite being a major stakeholder in these PSUs, the government is unable to control the oil prices.
Thus it is expected that fuel must also be treated as an equivalent commodity to others. This is in line with the national development and economy. Otherwise, an unfueled economy results in massive destruction.