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Rediff.com Business Why 75% drop in global oil prices isn't reaching you

Why 75% drop in global oil prices isn't

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February 07, 2016 10:16 IST

Centre and state governments are steadily increasing excise duties and
value-added tax

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ecord production in the United States, weakened demand from the Eurozone and emerging
economies like China and Brazil, and Irans entry into the international market have effectively
slashed the price of crude oil for India, from $106 per barrel in July 2014 to $26 in January
2016 - a 75 per cent drop over 15 months.
So, why are you not seeing evidence of this price-cut at your local petrol and diesel station?

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The answer: As global crude prices reach a 11-year low, the Centre and state governments
steadily increase excise duties and value-added tax, shoring up their revenues and keeping fuel
prices high for retail consumers.
Although India imports more than 80% of its fuel requirement, which means declining global
prices should, theoretically, have seen sharp declines in retail petrol and diesel prices, Indian

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consumers of petrol and diesel now pay about double the global rate.

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Retail prices of petrol and diesel prices in three states - Assam, Uttar Pradesh and Gujarat show a variation of less than 10 per cent during the current financial year, 2015-16, according
to an IndiaSpend analysis.
For instance, the petrol price in UP rose Rs 2 per litre, when global oil price halved over the
same period.

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Indian prices stay high because oil marketing companies (OMCs), such as Indian Oil
Corporation Ltd, Hindustan Petroleum Corporation Ltd and Reliance Industries Ltd., add
their margins, the central government adds excise, state governments add their own (valueadded) taxes, and the dealers (petrol pumps) get their commission.

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The total of these is the retail price of the fuel you pay.
Excise hiked five times in three months; diesel duty hiked 140%

The excise duty on petrol and diesel has been hiked five times over the last three months,
increasing the excise duty on petrol by 34 per cent. On diesel, excise duty has increased by 140
per cent.
The price at which OMCs sell petrol to dealers (petrol pumps) has been halved in two years.
Over the same period, retail petrol prices have come down only by 15 per cent.
The value-added taxes imposed by states have more or less remained the same, but excise
duties - both basic and additional - imposed by the Centre have doubled between 2014 and
2016.

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Why 75% drop in global oil prices isn't reaching you - Rediff.com Business http://www.rediff.com/business/report/special-why-75-drop-in-global-oil...

You pay more taxes on diesel and petrol than price of fuels
The addition of central taxes on diesel is higher than those on petrol. Central taxes per litre of
diesel rose to four times its value in April 2014 - from Rs 4.52 per litre to Rs 17.33 per litre in
February 2016.

Retail consumers pay more tax on petrol and diesel than its actual price.
Of the price you pay for a litre of petrol, 57 per cent goes to the government as tax. Of the Rs 44
per litre of diesel, 55 per cent is tax.
If the excise duties on diesel had not been increased these two years, diesel would have cost Rs
32 per litre today, other factors remaining the same.
The direct effect of oil prices on cost of transportation of goods and thus consumer inflation
has been demonstrated by research from Integrated Research and Action for Development (an
autonomous research institute), as journalist and economist Swaminathan Anklesaria Aiyar
wrote in this blog.
Research on inflation in Turkey and Sri Lanka has underlined the effect of fuel prices on
inflation.
Abhishek Waghmare is an analyst with IndiaSpend.
Abhishek Waghmare

Related News: Integrated Research and Action for Development, Indian Oil Corporation Ltd, Hindustan
Petroleum Corporation Ltd, IndiaSpend, Swaminathan Anklesaria Aiyar

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Discussion Board
Write a message
Total 7 messages

Pages | 1

Dear writer
by Abhinav Jain (View MyPage) on Feb 07, 2016 10:55 PM | Hide replies
Your article does not account for the fact that Indian rupee value against dollar was about 45 on avg 3 years ago.
Today its about 40 percentage higher. So the import cost while not visible is 40 percentage higher compared to what
we paid 3 years ago.
Forward | Report abuse
Re: Dear writer
by Abhinav Jain (View MyPage) on Feb 07, 2016 11:05 PM
So effectively for 30 dollar barrel we are paying about 40 percentage higher that is 42 dollars
appx
Forward | Report abuse

oil prices
by SATENDRA GOEL (View MyPage) on Feb 07, 2016 08:22 PM
The F.M. is making a big blunder by not reducing the price of fuel.What does the govt need money for when taxes in
some form or the other is being implemented every year.It is high time the govt starts reducing its expenditure,by
reducing its overbloated staff,irrevalent deppts,etc.Its high time the govt started thinking about the common man and
how benefits can be given to him

Forward | Report abuse

OROP past corruption strong usd = high prices

by Swissbanker (View MyPage) on Feb 07, 2016 12:29 PM | Hide replies
RS 1.1 trillion is to be paid under 7th pay commission and OROP of which 0.76 trillion or 76,000 crore will be from
the general budget and rest from rail budget. Plus past corruption has to be compensated, and the US dollar has
been moving up and oil is priced in US dollar so in rupees the price of oil hasn't declined as much as the dollar price.
Forward | Report abuse

Message deleted by moderator

Re: OROP past corruption strong usd = high prices
by Santa (View MyPage) on Feb 07, 2016 07:58 PM
Are you a d0nkkey or do you think all other Indians are donkkeys?
Forward | Report abuse
Re: Re: OROP past corruption strong usd = high prices
by shantanupratap trivedi (View MyPage) on Feb 08, 2016 12:27 AM
Santa,
I think you are a donk3y....
Forward | Report abuse

Total 7 messages

Pages: | 1

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