The negative news or event articles are not a part of the blog. But, the actual reason should be prevail. Recently, the crude prices are trending in India. In the national capital the price of Petrol touched all time high at Rs. 86.05. Also, the people in Mumbai are paying Rs. 92.28 for petrol. (26 January, 2021). There are several reasons why petrol prices have seen sudden growth.
Not only taxes and service charges make petrol costlier but there are other factors which are affecting the crude prices in India. State and Central government's additional taxes are also responsible. But the situation this time is different. The transport and refining cost are unknown to the people. The major source of crude for India must be from Iran and other middle east countries.
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Reasons of Why Petrol Prices Are All Time High
The year 2020-2021 is very different for the International markets. India has also suffered and economy is still recovering. There are several changes have done in the tax for crude in India. Petrol or crude is an essential commodity.
The world is depending on the crude. If a country wants to import crude from the International Markets, whether it is cheap or costly; it has to import because the whole economy depends on the crude.
It also depends from where a country is buying crude. There are mainly 3 regions in the world which controls the exports of crude.
- American WTI (West Texas Intermediate)
- OPEC (Organization of the Petrol Exporting Countries)
- BRENT OIL (Broom, Rannoch, Etive, Ness and Tarbert)
1) American WTI (West Texas Intermediate)
This mostly controls supplies which comes from the USA. Also, it's clients are neighboring countries of the USA. The crude oil prices are unstable here. Also, the graph of prices is almost V shaped, as there are so many ups and downs in it. Thus, India do not buy crude oil from the American WTI. Also, it is not so favorable for India's foreign exchange.
2) OPEC (Organization of the Petrol Exporting Countries)
The middle east countries who are highly dominating in the crude markets, whose associations is known as OPEC. Also, it deals accordingly. Comparatively, the OPEC is more costlier than the American WTI. Eventually, the prices in OPEC are very stable for long time.
The countries in OPEC decides prices of crude oil in a coordination. They also control the demand and supply artificially. This could be a prime reason behind the price stability in OPEC. That's why India buys the crude oil from the OPEC.
3) BRENT OIL (Broom, Rannoch, Etive, Ness and Tarbert)
Some Northern European countries and Scandinavia have made the organization for crude oil which is named as BRENT. These countries works in coordination to handle the crude oil business. Prices of crude in BRENT is also higher than the American WTI. The reason is similar to the OPEC.
So, now we have a clarity that India buys crude from the costlier organization. In India, around 80% crude oil is imported. India refines the crude oil on itself.
Why Sudden Growth In Petrol Prices?
Around the month of March and April 2020, countries around the world started imposing the lockdown. The businesses were closed, industries were in shut down conditions, refineries were not operational and there were no transportation. The aviation market was completely closed. Because of these events, the need and demand of crude oil suddenly dropped.
The prices of crude oil was also dropped rapidly. Although, in American WTI the prices were fall down into the negative mark. But, OPEC and BRENT kept the prices of crude oil between $16 to $20. It was not negative but the lowest among the decades.
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India always tries to find the opportunity in crude oil market. So it saw. The Government of India bear the loss of billions of dollars due to this pandemic. The government is trying to cover the losses. The government always looks into the taxes and the best place for it is crude oil business. Through the taxes the government will try to cover the deficit.
The Government of India is trying to maintain the price of petrol in between Rs. 80 to Rs. 90, whether the crude price in international market is law or high. The minimal amount of gap will be filled up with the help of taxes like VAT (Value Added Tax).
If in the International Market the prices fall all time law, in India it will not get down easily because the taxes have maintained the price.
In June and July because of the economies were reopened, businesses were started, transportation was revamped, aviation industries started flying operations, the prices of crude oil lifted up. The demand went up and the prices were started stabilizing. From the lowest, the crude prices doubled up in just 4 months.
India was not ready to adjust the prices and taxes. Also, the 3 months of lockdown gave us the very high economy loss. So, the government was trying to recover the economy through the various businesses and taxes. The value of patrol was lifted up to the extreme level. In some states the prices are at their highest point at Rs. 90 and 92.
Also remember, that if the Government of India minuses Rs. 4 from the petrol and diesel then the government will loss 1 Lakh Crore+ annually. That is why the minimum changes in the crude can impact the deficit of our entire nation.
If the deficit fails to get covered, then it will go into the public debt. The public debt will eventually cleared up by us. Basically, the expenditure will not just entirely disappeared! The government has to do something with the deficit.
This idea is not just applicable for only crude oil market, but also for the textile, automobile, transportations, entertainment, etc. The crude always stays into the media eyes, that is why we are looking into it everyday and every seconds.
PRIVACY MATTERES!
Taxes on Petrol in India
The price of crude oil till date is around $54 per barrel. (1 Barrel = 159 liters and ₹24.7 per liter)
₹0.52 per liter is refining cost.
₹6 for logistics and other refinery expenditure.
Total or approx. ₹31 per liter.
Now, ₹32.98 tax from the central government and some Value Added Tax (VAT) from the state government which is around ₹26 to ₹29.
Now, ₹2 to ₹3 margin of the dealer for his commission.
These all taxes and other expenditure lifts up the price of petrol around ₹90 or more.
IN THE MIDDLE OF VACCINATION DRIVE,
When Will The Price of Petrol Fall Down?
Till the end of the 2021, we can not see any downgrades in the patrol prices as the deficit is very high. The Government of India has to cover at least ₹2.50 Lakh Crore from these taxes. It will be used to cover up the deficit. As aimed.
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