Petrol , diesel rates
hiked, tremendously affecting India.
The continuous
increase in petrol and diesel prices is hiking to a troubling extent in India. It
has made horrendous situations for consumers
to live with the highest petrol prices in India.
States capitals in India has crossed approximately 100/L mark on Saturday, 23 October, continuing to rise for the fourth consecutive day. The price reached as high as Rs 95.97 per litre.
In Mumbai, petrol and diesel prices per
litre rise at Rs 113.12 and Rs 104.00 respectively.
The government seems to have no control on
the elevating oil prices from the past months as the COVID 19 situation improves
across the globe.
From hitting
as low as USD 16 per barrel on April 22, 2020, the price of Brent crude oil has
been rising steadily ever since and has now crossed the USD 80-per-barrel mark in
the international market. This rise in crude prices has resulted in all time high
prices in India.
Why is Petrol prices hiking ?
As the
world economy paces again after getting hit by COVID-19, global demand for
crude oil has increased in 2021 resulting in a sharp rise in prices.
Another reason for a sharp increase in international
oil prices is the supply restrictions maintained by the OPEC+ grouping nations.
As the world economies are recovering from COVID 19, the oil-producing economies
continue with slow production increases leading to a rise in oil and gas
prices.
The higher tax imposed by central and state governments of India has lead to surge in fuel prices.
The government regulated the petrol prices solely , earlier. It was revisited once in 15 days which was discontinued. From 2017, the fuel prices was revised on daily basis by the government.
This is
how it works:
Oil
Marketing Companies (OMCs) in India like Indian Oil Corporation Ltd, Bharat
Petroleum Corporation Ltd, and Hindustan Petroleum Corporation make this
decision based on a number of factors. But this is revisited by the PPAC
(Petroleum Planning and Analysis Cell) under the Ministry of Petroleum and
Natural Gas.
According
to a Lok Sabha response on 8 March, OMCs make these decisions based on
international product prices, exchange rate, tax structure, inland freight, and
other costs.
When is the price revised everyday?
The
price of petrol and diesel is re-examined at 6:00 am everyday.
Factors responsible for the surge of Petrol prices
in India
Crude
Oil Cost: It is unrefined oil, the price of which
fluctuates with demand and supply imbalance, foreign relations and future
reserves and suppress.
Increased
Demand: With an rise of vehicle-owning population,
demand increases which affects its price
Taxes: Taxes charged on the petrol also affects the price which is value added tax (VAT) and excise duty, It is charged by the government. This VAT is responsible for different oil prices in states.
Rupee
and Dollar: When dollar strengthens against Indian rupee,
buying cost of OMCs increase, and hence the price of petrol also increases.
Impact on India
Since India imports larger portion of fuel needs,
more dollars are needed to buy petrol leading to the reduction in liquidity.
The rupee is elevating to the rupees 75 per dollar
mark which will result in imported goods tending to be more expensive.
As the supply chain of coal has decreased, leading
to the increased demand for oil in the international market.
Brent crude oil import contributes to nearly
20% of India’s import bill.
The fuel import bill leaped from USD 8.5
billion for the quarter ended June 2020 to USD 24.7 billion for the quarter
ended June 2021.
The exorbitant fuel prices could lead to a surge in
inflation, forcing the RBI to go for liquidity tightening measures followed by
rate hikes.
An increase in crude prices will increase the cost of production and
transportation of several goods.
A surge in crude prices tends to increase
India’s expenditure and adversely affects the fiscal deficit.
Experts Say
Experts have examined that countries like India do not have much bargaining power in the current market scenario where supply is lower than demand and that India’s bargaining power will be reduced if diversified the crude oil procurement.
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