Wednesday, February 8, 2023

Decline in international crude oil prices remains ineffective on petrol prices in India

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With the fall of international oil prices, and the reason being its lower demand due to outbreak of COVID-19 pandemic, people throughout the world are suggested to observe lockdown which is resulting into great loss to the petroleum industry. However, even after huge reduction in the international oil prices, India seems to observe very minor change in its oil prices and it looks as if government is mopping up the gains in between.

However, the oil prices in India are determined by various factors such as excise duty, foreign exchange rates and domestic taxes by which Indian Government mainly control its pricing. Since, oil has been kept out of the purview of GST. Despite a decline in crude prices, oil prices in India are same and benefits are not being transferred to the consumers.

International crude oil prices have drastically declined from Dollar 63.27 to Dollar 23.32 in last 2 and half months. Whereas, instead of giving effect to reduced International Crude Oil prices for the benefit of consumer in such pandemic situation, Indian government has found their own interest of boosting finances and has raised the excise duty on petrol and diesel by Rs. 18 and Rs. 12/ litre respectively. However, according to experts any reduction in petrol prices often takes affects with a lag.

Whereas, every State government in exercise of the powers conferred to them by the State Value Added Tax Act, 2003 being of the opinion that it is expedient in the public interest so to do may make changes in the VAT rates and Central Government may also make changes in the excise duty keeping in mind the interest of the public at large. The question which arises here is that, whether it is in the public interest to forcefully increase the petrol and diesel prices even when the international crude oil prices are drastically decreasing? Is it ethical to keep the petrol and diesel prices up in situation of such a pandemic emergency?

In a recent development today, Parliament has passed the Finance Bill, 2020 without discussion which included the provision wherein the Central government is empowered to raise the prices of Petrol and Diesel each up to Rs.8 per litre. Decreased petrol prices may help in the reduction of prices of the necessary items such as food, milk, medicines, toiletries, etc. Lowered prices of items of necessity will surely help the middle income and lower income group to tackle with the situation more efficiently and effectively.

India Legal Bureau

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