To understand the rising fuel prices, one needs to understand the factors contributing to their hike. Petrol and diesel are decontrolled fuels in India which means their prices are linked to global crude oil prices.

Decontrolling oil prices has never favoured consumers. When the global prices increase, the consumer has to pay extra for every litre of fuel and when the prices decrease, both the central government and state government levies extra taxes to get extra revenue.

The Central and state governments levy excise tax and the centre has changed these taxes in such a way that they get a larger share than the state governments.

The petrol prices are calculated by adding VAT( collected by the state government)+ Excise duty (collected by the central government). Sixty per cent of the retail selling price of petrol and over fifty-four per cent for diesel accounts for both central and state taxes.

Since the central government get a larger share of taxes, the state government has no option but to levy their own taxes on fuel and thus, making them charge extra state excise tax from the consumers. The cartelisation by state-run oil marketing companies like Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum also affect the fuel prices in our country.

Petrol and diesel prices in India have surpassed the Rs 100 mark in many states and the common man is the one suffering the most. Dharmendra Pradhan (the Union Petroleum and Natural Gas and Steel Minister) blamed the price hike on oil-rich nations seeking more profits by manufacturing less fuel to gain more profits.

He justified the taxes by mentioning how both the central government and state governments are undertaking various projects and making developments in the wake of Covid-19 which will further increase employment too. He also added that the expenditure of the health sector has also increased and thus, earnings are less.

Author: Vanshika Jain