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Know why petrol, diesel prices are rising

From the beginning of June 2020, petrol and diesel prices are on a continuous hike. In 19 straight days, petrol price has been raised on 18 occasions since June 7 and now totals to Rs 8.66 a litre. Similarly, diesel price has gone up by Rs 10.63 per litre. Let us now try to understand why fuel prices are going up.

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Published : Jun 25, 2020, 5:57 PM IST

Hyderabad: From the beginning of June 2020, petrol and diesel prices are on a continuous hike. In 19 straight days, petrol price has been raised on 18 occasions since June 7 and now totals to Rs 8.66 a litre. Similarly, diesel price has gone up by Rs 10.63 per litre.

Hike in fuel prices
Hike in fuel prices

Diesel had also for the first time become costlier than petrol in Delhi on Wednesday and has now crossed the Rs 80 per litre-mark. However, diesel is costlier than petrol only in the national capital where the state government had raised local sales tax or VAT on the fuel sharply last month. It costs less than petrol in other cities.

Let us now try to understand why fuel prices are going up:

Crude oil prices: India imports over 80 per cent of its crude oil requirements and hence fluctuations in crude oil prices globally would impact the prices in India as well. In the month of April, the price of crude did drastically reduced due to COVID-19 and lesser demand but now the global crude oil prices appears to be bouncing back.

Increase in tax: In the last two months both the Centre and the State have increased the taxes levied on petrol and diesel. The government on March 14 hiked excise duty on petrol and diesel by Rs 3 per litre each and then again on May 5 by a record Rs 10 per litre in case of petrol and Rs 13 on diesel.

Hike in fuel prices
Hike in fuel prices

Retail prices of the fuels increased due to the rise in value-added tax (VAT) by state governments. For example, the state government in Delhi has raised the VAT on petrol to 30 per cent from 27 per cent earlier, while for diesel, the VAT has been sharply raised to 30 per cent from 16.75 per cent.

Oil marketing companies passing hike to consumers: After the hike of excise duty in March the Oil Marketing Companies (OMCs) did not pass on the hike to the consumers by absorbing the losses. But after the 2nd excise duty hike in May OMCs passed on the increase in rates to the consumers leading to the continuous fuel price hike in the month of June.

Read more:Crude Oil and Covid-19: Implications for India

Hyderabad: From the beginning of June 2020, petrol and diesel prices are on a continuous hike. In 19 straight days, petrol price has been raised on 18 occasions since June 7 and now totals to Rs 8.66 a litre. Similarly, diesel price has gone up by Rs 10.63 per litre.

Hike in fuel prices
Hike in fuel prices

Diesel had also for the first time become costlier than petrol in Delhi on Wednesday and has now crossed the Rs 80 per litre-mark. However, diesel is costlier than petrol only in the national capital where the state government had raised local sales tax or VAT on the fuel sharply last month. It costs less than petrol in other cities.

Let us now try to understand why fuel prices are going up:

Crude oil prices: India imports over 80 per cent of its crude oil requirements and hence fluctuations in crude oil prices globally would impact the prices in India as well. In the month of April, the price of crude did drastically reduced due to COVID-19 and lesser demand but now the global crude oil prices appears to be bouncing back.

Increase in tax: In the last two months both the Centre and the State have increased the taxes levied on petrol and diesel. The government on March 14 hiked excise duty on petrol and diesel by Rs 3 per litre each and then again on May 5 by a record Rs 10 per litre in case of petrol and Rs 13 on diesel.

Hike in fuel prices
Hike in fuel prices

Retail prices of the fuels increased due to the rise in value-added tax (VAT) by state governments. For example, the state government in Delhi has raised the VAT on petrol to 30 per cent from 27 per cent earlier, while for diesel, the VAT has been sharply raised to 30 per cent from 16.75 per cent.

Oil marketing companies passing hike to consumers: After the hike of excise duty in March the Oil Marketing Companies (OMCs) did not pass on the hike to the consumers by absorbing the losses. But after the 2nd excise duty hike in May OMCs passed on the increase in rates to the consumers leading to the continuous fuel price hike in the month of June.

Read more:Crude Oil and Covid-19: Implications for India

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