Why petrol and diesel prices could rise further despite ₹10 hike in 16 days?
Petrol and diesel prices are on fire as the motor fuel costs have been increased further on Wednesday by 80 paise a litre each, taking the total increase in fuel rates to ₹10 per litre in the last 16 days. The price of petrol and diesel has been increased by 14 times in last over two weeks. However, motorists may have to shell out more money as the prices of motor fuels are unlikely to take a pause anytime soon. Instead, both petrol and diesel prices are likely to rise further putting more pressure on common people.
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Retail prices of petrol and diesel could increase by up to 60 paise per litre for every $1 per barrel hike in the price of crude oil. The oil marketing companies could take this strategy to maintain the regular margins on the sale of petrol and diesel, suggests experts. The price of crude oil in the international market has increased by around $28.4 per barrel since 4th November last year to 108.9 per barrel. This means the petrol and diesel prices in India could see a further hike of up to ₹7.8 per litre on each fuel to match the current crude price.
Oil marketing companies in India stopped daily price revision on 4th November last year for 137 days. During this period, the price hike of motor fuels was halted.
In such a situation, a tax cut on motor fuels may bring some relief to the consumers. The central government announced an excise duty cut in November last year on both petrol and diesel. Excise duty was reduced by ₹5 per litre on petrol and ₹10 per litre on diesel. However, despite the reduction, central taxes are still higher by ₹8 per litre on petrol and ₹6 per litre on diesel compared to their pre-pandemic levels. Above that, the state government imposed Vat rates taking the total tax incidence higher to around 43 per cent of the retail price of petrol and around 37 per cent of diesel retail price. Hence, a tax cut may bring some relief for the motorists and common people.