Petrol Diesel Prices Problem in India – Fuel Prices Issue in India Full Details – In this post we will discuss about fuel prices in India . This is A big issue In India Right Now . This is Political issue and Every Political Party Targeting central government for Price Hike in Petrol And Diesel Prices .

This is an important Topic For Economy part in UPSC Prelims and Mains Exam. We Will cover Full Details of This topic.

Petrol Diesel Prices Problem in India – Fuel Prices Issue in India Full Details

Petrol Diesel Prices Problem in India - Fuel Prices Issue in India Full Details

Lets First talk About Fuel Scenario In India

  • India is the 3rd Largest Oil Consumer In World After USA And China
  • India Import More than 80 Percent Of Oil from Other Countries . Out Of 80 percent 60 Percent Crude oil Is imported from OPEC Countries .
  • India import Oil From Saudi Arabia,IRAN,IRAQ,Venezuala, Kuwait etc.
  • IRAN Import 10 Percent Of Its requirement Crude Oil .IRAN Provide 60 Days credit To India For Purchasing crude Oil .

The value of import bill for oil increased by 76% in July from a year earlier to $10.2 bn, which pushed up the trade deficit to more than $18 bn (the highest in five years). The increasing crude oil prices will ensure that the CAD will reach 2.6% of GDP in this financial year from 1.5% a year ago

Lets Talk About Deregulation Of Petrol And Diesel Prices In India

  • ATF prices were deregulated in 2002
  • Petrol prices were deregulated in 2010
  • Diesel prices were deregulated in 2014.
  • The present government has implemented the dynamic pricing.
  • Every Day Prices of Fuel Change According to International market Prices Change.

What items comes under GST And What Not

  • LPG
  • Naptha
  • Furnace Oil
  • Light Diesel

  • Crude oil
  • High Speed Diesel
  • Petrol (Motor Spirit)
  • Natural Gas
  • Aviation Turbine Fuel

The government incurs subsidy costs as not all the fuel products are linked to market rates. Components such as kerosene and LPG still are provided with subsidy.

For this financial year the govt has allocated ₹ 24932 Cr. the crashing rupee value will increase the subsidy burden of the government.

Petrol’s pricing structure In India 

  • Fuel component-52%
  • Customs Duty-4%
  • Excise Duty-25%
  • Sales VAT-17%
  • Dealer Commission-2%

What Are The Main Reasons of fuel Prices In India

  1. Stronger Dollar In Comparison Of Indian Rupee
  2. Mostly India is dependent Of Import Of Crude Oil . India import 80 Percent Of Crude Oil.
  3. Another Main Reason of import Of oil is Sanction On IRAN.
  4. Supply Of crude oil is Not Proper. There is a Huge variation in Supply Of Crude oil In India.
  5. Due to the political instability in Venezuela, a major oil-producing nation in the world, there has been a huge cut in the production of oil in the country
  6. US President Donald Trump’s announcement that the nation would walk out of the Iran nuclear deal was one of the reasons for the surge.
  7. In order to keep oil prices higher, there have been production cuts for over a year by oil-producing countries led by Saudi Arabia and Russia.

Impact Of Oil Prices Increase On Indian Economy

  • Domestic inflation
  • RBI may increase the interest rates
  • Impact on the finances of the Government – the government subsidy bill will increase
  • Effect the households
  • Will Affect Growth of Industrial Sector
  • Indian Economy Growth Will Slow Down
  • Indian Government Borrowing cost Will Increase
  • Daily Uses Commodities Prices Increased.

What Are The Criticism of Indian Government

  1. The government has increased the excise duties nine times since 2014
  2. The taxes on the petrol by the central govt has been increased by 126% presently the excise duty imposed by the govt is ₹ 19.48
  3. The taxes on the Diesel by the central govt has been increased by 330%
    The govt collected excise worth ₹ 77000 Cr in 2013 and ₹ 2.4 lakh Cr in FY18
  4. The govt has been using this to provide recapitalisation package to banks, subsidize the air India etc

What Government Should Do for Solving This problem of Fuel Prices In India

  1. Bring petrol And Diesel under GST. Maximum tax rate Would be 28 Percent
  2. Reduce Dependence Of Petrol And diesel
  3. Promote More Electrical vehicle
  4. Create a stabilization fund or reserve account – Thailand, UK etc

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