Record production in the United States (US), weakened demand from the Eurozone and emerging economies like China and Brazil, and Iran’s entry into the international market have effectively slashed the price of crude oil for India, from $106 per barrel in July 2014 to $26 in January 2016—a 75% drop over 15 months.
So, why are you not seeing evidence of this price-cut at your local petrol and diesel station?
The answer: As global crude prices reach a 11-year low, the Centre and state governments steadily increase excise duties and value-added tax, shoring up their revenues and keeping fuel prices high for retail consumers.
Although India imports more than 80% of its fuel requirement, which means declining global prices should, theoretically, have seen sharp declines in retail petrol and diesel prices, Indian consumers of petrol and diesel now pay about double the global rate.
A series of taxes, oil-company profits and other commissions
Retail prices of petrol and diesel prices in three states—Assam, Uttar Pradesh and Gujarat—show a variation of less than 10% during the current financial year, 2015-16, according to an IndiaSpend analysis.
For instance, the petrol price in UP rose Rs 2 per litre, when global oil price halved over the same period.
Indian prices stay high because oil marketing companies (OMCs), such as Indian Oil Corporation Ltd, Hindustan Petroleum Corporation Ltd and Reliance Industries Ltd., add their margins, the central government adds excise, state governments add their own (value-added) taxes, and the dealers (petrol pumps) get their commission.
The total of these is the retail price of the fuel you pay.
Excise hiked five times in three months; diesel duty hiked 140%