Petro and diesel prices are increasing to a record high, despite the falling international crude oil prices.
The recent 'daily price revision' policy introduced by the government is also not benefitting the consumers.
It calls for the government to pay attention to the factors behind this and take measures to make petrol and diesel affordable to its consumers.
What is daily price revision policy?
Under this, the retail selling prices of petrol and diesel is revised daily based on average international price and the currency exchange rate.
Government argued that this would pass on the benefit of fall in international prices to the end consumers.
However, prices of petrol and diesel have only been going up, despite the introduction of the dynamic fuel pricing.
What are the reasons for this anomaly?
Taxes - The favourable impact that dynamic fuel pricing makes, is outweighed by the impact of taxes levied by the government.
The central excise duty on petrol shot up by 127 percent and that on diesel by 387 percent in the last two years.
In addition to this, there are other state levies that add up to the fuel bill.
Notably, about half the price paid by the Indian end-consumer for petrol goes towards paying these taxes.
GST - The recently introduced GST also did not cover the petroleum products and so prices vary at locations depending on the applicable state taxes.
The goods and services tax (GST), even at its highest slab of 28%, would substantially lower the current tax burden on fuels, if covered.
Price deregulation - Traditionally, fuel prices were determined on a cost-plus basis, which led domestic prices to fall in line with the cost of inputs like crude oil.
However,petrol and diesel pricing were deregulated in 2010 and 2014 respectively.
This caused the fuel prices to be determined primarily by the forces of supply and demand rather than input costs.
How does the future look?
The signs of an increase in international crude oil prices have started to set in.
However, there are no signs of the government cutting down the taxes.
If petrol and diesel are to be affordable to end-consumers, the government must step in and introduce measures to lower the prices.
