Unjustified Petrol Price

Hamid Qureshi
September 20, 2017 OPINION 730 Views

In Srinagar city and adjoining areas, price of petrol as on today is approximately 74 rupees per litre. In some parts of the country price of the petrol has crossed 80 rupees per litre as well. Although it’s not new that we as end consumers have been paying higher prices of petrol as compared to many of the countries around the world, however it needs to be understood that the major chunk of the price we pay for the petrol actually goes directly to the government in the name of ‘Tax’ under different economics jargons.

Many of us might already know that the price of the petrol is directly dependent on the crude oil price which sold in the international oil market; yet the prices we pay these days for petrol doesn’t seem that they are directly dependent on international crude oil price. Currently the price of crude oil in the international market is approximately $52 per barrel which is half the price as in the year of 2012. Remarkably in the year 2012 the price of crude oil was more than $105 per barrel and we were paying approximately same price (74 rupees) at that time. Now the logical question is that if the prices of the crude oil are more than 50% down than the prices of 2012 why we are still paying the same price as on today?

As per the experts of this field, the simple answer to this question is a three later word called higher ‘TAX’. The tax which is being currently paid by us on petrol is approximately 107%. Yes that is right a three figure tax rate on petrol which use on daily basis to run our vehicles. To be more precise on this concept let’s try to understand how we arrived at huge 107 percent tax figure for petrol. As stated above, the current price of crude oil these days is $52 per barrel, which is approximately 20 rupees per litre, now add the refining cost of around 10 rupees per litre and also append dealer’s charges at around 3 to 4 rupees per litre, which approximately calculates to around 33 to 34 rupees per litre for petrol. Yes that is it; the actual price should be around this price band i.e., 33-40 rupees per litre.

At the present if we are paying 75 rupees per litre then the question is where does 40 rupees per litre from the pocket go? Again it is straightforward, 40 rupees from our pocket directly lands into government’s coffers. So as of now the government is earning approximately 40 rupees per litre of petrol we buy. Another question is, if all the people like us are shelling out so much of tax towards government then what are we getting in return? Well most of the people say that they are getting probably nothing in return of this high end tax. People often say that we have the same roads, we have the same bridges we have the same infrastructure nothing changes, nothing has changed, and probably nothing will change in future.

Coming to the related aspect of excise duty on petrol price, evidently there has been a huge rise on excise duty of petrol, notably in April 2014 it was around 9.48 Rupees and on the December 2016 the excise duty was 21.48 rupees on petrol alone. This is a fact that crude oil prices keep changing very fast, however on current scenario, most of the times, the prices have been range bound and they have not spiked or went out of roof. Crude oil prices have been steady from sometime now and government could have taken proper steps when the crude oil price was approximately $40 per barrel.

Anyways, if the government has not been active to take advantage of the low crude oil price market, it’s a black and white disappointment of their policy and corresponding administration, further there are many areas of economics related to oil price where government can actually take some steps and bring substantially bring down the petrol prices. Definitely a tax rate more than hundred percent is creating a hole in our already burning pockets. Coming to the current regime in power in centre, it is really hard to believe that the current people in power were actively against the previous ones when the prices of petrol were high back in 2012. It is worth noting that most of the high profile party administration of current regime had participated in ‘Bandhs’ and criticized the previous regime with tooth and nail for the steep petrol prices.

As mentioned above, although at that time (in year 2012) the crude oil prices where double as on today. It seems the current regime has forgotten what they have said in the past. It is in total contrast what they say now, because few days back a statement came from another powerful government official stating that people who own cars can afford the petrol as well, nevertheless it is evident that people in power have no idea that most of the people own two wheelers in this country and not cars. Still if people own cars, it doesn’t mean that government puts more than hundred percent of tax on petrol. This is high time that government should take concrete steps to avoid this high tax rate on a commodity like petrol, seeing that there are so many other things where they could actually put these taxes, to name a few government should actually put the taxes on liquor, cigarettes, tobacco products, luxury items and related. Similarly they could put higher tax bracket on those products which are not used by common people at all.

Author has Double Masters in Science & Management; he currently heads Talent Management & Technology Operations for ADC in North America and Asia Pacific.

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