Black gold is the new milch cow

The lockdown may have been mind-numbing, with an unreasonable longing for custom-made burgers and mojitos, but it did save us some money. One expense many of us were spared was fuel, which would have been spent on long and halting commutes, and it runs into a few thousands even for the most frugal. No one missed the traffic snarls or the petrol or diesel bills. But, with the government’s usurious petrol and diesel price hike, it seems like all that we saved will vanish into thin air. Petrol prices have crossed the Rs.93/litre mark in Mumbai and diesel prices have reached an all-time high at Rs.83.67/litre. Even in the national capital, diesel rates are at Rs.76.83/litre while one litre of petrol costs Rs.86.85. 

Improved demand for petroleum products, because of the vaccine, and production cutback by OPEC nations have fueled an increase in oil prices. The price of Brent Crude has shot up to $56/barrel in January 2021 from $19/barrel in April 2020. While that is the standard explanation, it is the central and state taxes that are draining your pocket.

The base price of petrol on January 1, 2021, was Rs.27.37/litre. Adding to that a freight levy of #0.37/litre, a dealer’s commission averaging Rs.3.67/litre, an excise duty of Rs.32.98/litre and value added tax of Rs.19.32/litre, the final retail selling price of petrol came to Rs.83.71 on January 1, 2021.

These numbers show that around 60% of the fuel price that one pays comprises of taxes. In the FY22 Budget, the government has introduced a new agriculture infrastructure and development cess (AIDC) of Rs.2.5/litre on petrol and Rs.4/litre on diesel, while reducing an equal amount of excise duty on the two fuels, thereby providing no respite to the consumer.