The Indian motorist is having a tough time. What with additional GST cess, way too much of a bountiful rainfall which results in potholed and flooded roads, now he/she has to fork out a fortune for fossil fuels like petrol and diesel. Costly fuel means the hapless motorist has to worry about paying more money for his/her mileage rather than tracking true to automakers’ advertising mantra of ‘more mileage for your money’.
The price of petrol, the fuel on which two-wheelers tank up and a good number of passenger vehicles too, has hit a new high. In Mumbai, the country’s financial capital, petrol is blowing a hole in the hapless motorist’s wallet: as of September 19, the fuel costs Rs 79.63, just 37 paise short of the Rs 80 mark. Motorists in the other metros pay a little less – Delhi (Rs 70.52), Kolkata (Rs 73.26) and Chennai (Rs 73.10).
At present, the price differential between petrol and diesel is Rs 17.12 a litre. A litre of diesel now costs Rs 62.51 in Mumbai, Rs 58.85 in Delhi, Rs 61.51 in Kolkata and Rs 61.99 in Chennai.
What is hurting the Indian motorist the most is the fact that globally crude oil prices are down. Since the government-introduced daily fuel price revision exercise began on June 16, 2017 retail petrol and diesel prices have scaled their highest levels since 2014, despite the fact global crude oil prices have nearly halved. In CY2014, petrol price averaged Rs 63.46 a litre in Mumbai; between April 1 to September 18, 2017 the average retail price of petrol works out to Rs 76.13 (+20%) a litre.
This contra-movement in fuel prices comes at a time when international crude oil prices have come down significantly. On March, 1, 2014 global crude cost $108.6 per barrel (Rs 6,860), while on September 15, 2017 it could be bought at $54.58 (Rs 3,447). It helps to know that the rupee-dollar exchange rate for the same period was fairly stable at Rs 61.76 and Rs 63.90 respectively at the time.
One bbl or barrel is the unit of volume for crude oil and petroleum products and equals 42 US gallons or 35 UK (imperial) gallons, or approximately 159 litres.
The potential for petrol and diesel price going down substantially is always there, but for the high level of excise duty (charged by the Central government) and Value Added Tax (by state governments). For instance, in Delhi, petrol costs Rs 70.52 a litre which includes Rs 21.48 excise duty and Rs 14.99 VAT. This adds up to Rs 36.47 a litre, which is more than half of the final price a motorist pays for petrol in the capital city.
Likewise, in Delhi, diesel costs Rs 58.85 a litre which includes Rs 17.33 excise duty and Rs 8.69 VAT (@16.75% + 25 paise per litre pollution cess) which adds up to Rs 26.02.
To add insult to injury, a few days ago it was reported that India’s new tourism minister KJ Alphons justified the high fuel prices by saying, “We are going to tax people who can afford to pay. Somebody who has a car, bike; certainly he is not starving. Somebody who can afford to pay, has to pay.”
Defending the existing high fuel prices, the government has said that the higher revenues will help the infrastructural development needed for the country.
Meanwhile, finance minister Arun Jaitley has been asking state governments to revise their VAT structure on fuel for manufacturing, but given the fact that fuels have been put outside the recently introduced GST, no respite can be seen in the immediate future.