In the wake of the coronavirus lockdown, crude oil prices have hit an all-time low but that has not translated to a proportionate decrease in the price of petrol and diesel. Here is why.
The lockdown came into effect swiftly and is being followed as strictly as possible in numerous countries around the world. Roads that thronged with traffic now lie empty because all their users are locked up in the safety of their homes, with their automobiles collecting dust in the garage. This sudden – but not entirely unforeseen – outcome has stumped the oil industry due to a stunning lack of demand for their products. As expected, crude oil prices have hit an all-new low in two decades but if you think this is enough reason to bring down petrol and diesel prices to what they were in the 1990s, that isn’t the case.
In fact, petrol and diesel prices are almost the same now as they were before the lockdown. So, although crude oil prices have dropped, that does not reflect in the final pricing because the difference is made up by hiking the excise duty (central government tax) and Value Added Tax (different rates for different states). Excise duty is now at 46.28 per cent of the price for a litre of petrol and 45.87 per cent the price for a litre of diesel. Meanwhile, VAT (for Delhi) stands at 23.07 per cent and 23.43 per cent of the prices for a litre of petrol and diesel respectively. The government claim to have made this move to replenish their reserves that are being depleted by the lockdown crisis. Thankfully, oil marketing companies have agreed to absorb some of the losses using the profit they make from the low crude oil prices.
Story: Joshua Varghese