Empire Diaries Desk
New Delhi, May 6, 2020: The Indian capital has announced a stunning hike in the prices of petrol and diesel across all its pumps. Diesel saw a sharp price rise of Rs 7.10 per litre while the price of petrol went up by Rs 1.67 per litre.
Petrol prices in New Delhi shot up to Rs 71.26 per litre as against Rs 69.59 per litre. Diesel price jumped to Rs 69.39 per litre as against Rupees 62.29.
The official logic is simple and appears to make sense. The government argues that because of the #lockdown enforced by the #coronavirus #pandemic, the bulk of its revenue sources have dried up completely. Hence, the need to increase Value Added Tax (VAT) on fossil fuels to offset the lack of revenue flow.
In the context of the economic damage done by #Covid19, the move does not seem outrageous at first. But if you just look up and beyond the country and look around at what’s happening in the world of fossil fuels out there, you will realise the absurdity of India’s latest fuel price hike.
Barely a few weeks ago, the world of crude oil business went through an unprecedented earthquake when prices crashed to never-before-seen levels. #WTI crude, the American benchmark, had plummeted to below-zero prices – for the first time ever. And #Brent crude, the international benchmark, had collapsed to under $20 per barrel.
As of today, both WTI and Brent prices have only marginally recovered, but they are still left grovelling in the dirt. WTI is selling for $23.86 per barrel and Brent is selling for $29.97 per barrel. These international crude oil prices are incomparable to the heyday when a barrel would sell for way more than $100.
That brings us to the fundamental question: when international crude oil prices are crashing like never before, why is the Indian government – which is clearly in a position to buy foreign oil for dirt cheap – selling that same oil domestically in some parts of the country at sharply increased rates?
The exact math is debatable, but it widely accepted that of the price of petrol and diesel that we will now pay at our pumps in Delhi, about 40% is the actual cost of buying and preparing it for sale. That means 60% of the price is purely a tax – VAT.
Sure, the outbreak has tormented the bank balances of the country’s administration. It wasn’t prepared for this economic rout. But how right is it for the powers-that-be to domestically jack up the prices of highly essential commodities like fossil fuels while internationally their costs are facing a jaw-dropping freefall?
So, are Indian fuel buyers being overtaxed at the gravest time of their lives?