How & Who Decides Fuel Price in India?

How & Who Decides Fuel Price in India? : -Hello jubilant readers!! We think about a lot of things and try to find some unanswered questions. Today, we have a similar topic to talk about. Have you ever wondered How & Who Decides Fuel Price in India? And do you get it’s answer? If not or is not clear, then learn with us.

Who Decides Fuel Price

There are many factors those decide the price of fuels, but we have categorised mainly in four factors.
First factor is the price of crude oil in international market, second is the taxes levied by the State and Central Government, third is the VAT and forth is the dealer’s commission ie commission earned by petrol station owners.

Taxes on fuels is a huge revenue generator for the government otherwise fuels would be much cheaper. But it’s a tough decision for the governments to cut fuel prices.

Fuel Price
Fuel Price

How Fuel Price Change?

We know fuel prices change daily, but it was not so before “16th June 2017”. That time fuel prices were revised every fortnight, means the prices changed on 1st and 16th of every month. On 16th June 2017, a new scheme was implemented under which prices are revised every morning at 6. As for the everyday change in fuel prices, it’s because of a dynamic pricing system that reflects fluctuations in the global oil market.

Since India imports about 84% of petroleum products, any change in the international crude oil prices significantly impacts the prices in the country. If the global crude prices are high, then India, too procures it at a high rate and vice-versa.

Let’s talk about how taxes are implemented on Fuel Price:-

As of now, fuel has been kept outside the purview of Goods and Services Tax (GST), so the most important factor is the tax levied by the State and Central Government. It has been found increasing excise duty, even as global prices fell, leading to an increase in the central government’s revenue.

Currently, petrol is taxed at a little more than 100 per cent, while it amounts to 66.48 per cent on diesel. Interestingly, while the retail prices have gone up, the price at which the fuel is sold to petrol pump dealers has come down drastically since 2013. The government’s effective tax rate on petrol in 2013 was at around 43 per cent and presently it is a little over 100 per cent.

According to the Ministry of Finance’s revenue collection estimates, the Centre expects to collect more than Rs 2.579 lakh crore by levying taxes on the petroleum products by the end of this fiscal. This is a massive jump from the gross revenue collection of around Rs 88,600 crore in 2013/14. In the last fiscal the collection was Rs 2.016 lakh crore.

Let us see the whole taxation system with an example :-

But here some statements by the government, which show why fuel prices are so much high-

On 13th June 2021, Union Minister for Petroleum and Natural Gas and Steel Dharmendra Pradhan said fuel prices cannot be brought down because the government is saving money to spend on welfare schemes.

He further said “I accept that current fuel prices are problematic for people, but be it central/state government, over Rs 35,000 crore have been spent on vaccines in a year,” said Pradhan while speaking to media persons. “In such dire times, we are saving money to spend on welfare schemes.”

“Prime Minister Narendra Modi approved Rs 1 lakh crore under the Pradhan Mantri Garib Kalyan Yojana scheme to give free food grain to the poor for eight months,” he said. “Under PM-Kisan, thousands of crores have been directly deposited in the bank accounts of our farmers. The minimum support price was hiked recently. And all this is happening in the current year.”

Those statements were little convincing, but prices of fuel are touching sky. The government should think about everyone because not everyone affords that price level of fuel.

That’s all for today from our side, you can read such interesting article on our site.

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