Why it’s possible to cut petrol, diesel prices in India

NEW DELHI: India’s daily consumption of crude oil is 4.5 million barrels (1 barrel about 159 litres), the third highest globally. Only the US and China consume more than us. We however have way smaller domestic oil reserves and are dependent on imports for about 80% of our total oil consumption.

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The government got involved in regulating oil prices from 1948, and decided that international prices alone could not be the determinant as indigenous production and refining capacity was increasing. From the 70s to the early 2000s, the oil prices committee recommended an administered pricing mechanism based on domestic cost of production. In 2010, petrol prices were deregulated, while diesel was freed up in 2014.
How is petroleum priced in India?
The government gotinvolved in regulating oil prices from 1948, and decided that international prices alone could not be the determinant as indigenous production and refining capacity was increasing. From the70s to the early 2000s, the oil prices committee recommended an administered pricing mechanism based on domestic cost of production. In 2010, petrol prices were deregulated, while diesel was freed up in 2014.

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Data for the past four years shows both Centre and states make large sums from petroleum products. For instance, in 2013-14, the Centre collected Rs 1.1 lakh crore as taxes from petroleum of which Rs 0.8 lakh crore was spent in payouts including subsidies. This translated into a net gain of Rs 0.3 lakh crore for the Centre. This gain increased to Rs 2.5 lakh crore in 2016-17.

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Isn’t it fair to tax petroleum and use that money for welfare? 

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