Why is Petrol in India Expensive Despite Lower Crude Prices and the Modi Government's Reduction Plans?

The price of petrol in India has often been a subject of debate and confusion, especially when global crude oil prices do not reflect the same. Despite the government's attempts to reduce petrol prices, reasons for higher costs to consumers are multifaceted. In this article, we will explore the factors behind the higher petrol costs in India and clarify why these adjustments are necessary.

The Complexity of Petrol Pricing in India

Crude oil is not directly sold in the market; it requires extensive refining and transportation processes. These steps contribute significantly to the final cost. Transporting crude oil from overseas, refining it into petrol, and then distributing it to dealers involve considerable expenses. Additionally, there are excise duties, taxes, and other costs that add to the final price that consumers pay at the pump.

Government Actions and Economic Considerations

The government has implemented various measures, such as levying extra duties on petrol products. This action is intended to address the shortfall in tax revenues due to the economic downturn caused by the COVID-19 pandemic and the associated decline in other direct taxes and GST collections.

The current high petrol prices can also be attributed to economic challenges faced in recent years. The government aims to recover its losses in the petrol sector through increased excise duties. This method is a pragmatic approach to ensure economic stability and growth.

Challenges Faced by the Government

During the pandemic, government revenues have significantly declined, while expenses have remained high, necessitating such measures. The government cannot rely on increasing GST rates, as this would further burden consumers. Instead, they have sought to maintain demand by reducing GST where feasible, which also impacts petrol and diesel prices.

The decreased economic activity has led to lower tax collections, including income tax. With many citizens experiencing job losses or reduced income, the tax liabilities have decreased. To mitigate this, the government has turned to increasing VAT (Value Added Tax) on petroleum products, which in turn affects petrol prices.

Critical Examination of Government Actions and Their Intentions

While some may criticize the government for their economic mismanagement, it is crucial to understand the broader context. The government has taken steps to maintain economic stability and ensure that petrol revenues can be used for the country's development. However, these actions have led to increased costs for consumers.

It's important to note that the government is not the only entity benefitting from higher petrol prices. Adani, Reliance, and other business tycoons also derive significant profits from these prices. The government's ability to manage these financial matters is a subject of public debate.

The current financial situation in India highlights the need for a more robust and transparent economic policy. While the cricket player's statement is undoubtedly harsh, it provides a useful critique of the government's handling of financial affairs. The Modi government has faced criticism for its economic policies and spending habits, including spending millions on overseas trips while the economy faces challenges.

Conclusion

Understanding the complex factors behind the higher petrol prices in India is crucial. While the government's actions may appear intimidating, they reflect the broader economic challenges and recovery efforts in the wake of the pandemic. Despite these struggles, the government aims to improve the economy and ensure that petrol revenues can be reinvested into the country's development. Understanding these factors can help consumers make informed decisions and provide context for the current economic situation.

Keywords: petrol price in India, crude oil prices, Indian economy, GST implementation