*CRUDE OIL UPDATES*
- Sate-run oil marketing companies (OMCs) kept fuel prices unchanged on Tuesday as global crude oil prices remain weak. There has been no change in fuel prices for the past 17 days.
- In Delhi, petrol is retailing at Rs 101.84 per litre, while it costs nearly Rs 108 per litre in Mumbai. Petrol rates remain above Rs 102 per litre in Kolkata and Chennai.
How fuel prices are making life difficult for Indians?
- Elevated fuel prices have been a major concern for citizens as it is directly impacting household finances.
- Higher petrol and diesel prices have led to a sharp rise in inflation, leading to hiked prices for many goods and services.
- The country’s economic recovery could also face turbulence if fuel prices remain elevated for a long duration, according to multiple experts.
- Consumer sentiment has already taken a hit and even as demand rises, there is a risk of stagnation due to higher prices of goods and services.
WHY ARE FUEL PRICES SO HIGH?
- Fuel prices have increased sharply in 2021 after a recovery in international crude oil prices forced state-run OMCs to increase domestic rates. However, high taxes levied on fuel have made all the difference.
- The central government had sharply increased excise duty on petrol and diesel in 2020 after the Covid-19 pandemic led to significant revenue loss. The excise duty has not been reduced since then.
- Despite the burden on citizens, the central government has made it clear that it is not in a position to reduce excise duty levied on petrol and diesel. Even states have said it would not be possible to reduce that levy value-added tax (VAT) levied on fuel at the moment.
- Without the possibility of a tax cut, only a reduction in actual domestic fuel rates by OMCs could provide some respite to citizens
*At the moment, it seems domestic fuel prices may not reduce anytime soon, and it could directly impact the country’s economic recovery as a threat of a possible third wave looms.*