By Akash Pandey :
Petroleum is a commodity which has the capability to ruin or develop an economy. Since its discovery, it has fuelled the development of several countries and is in the process of contributing to uplift many third world countries towards the Title of either “Developed” or “Developing” country. Petroleum Industry in India can be dated back to 1889 when the first Oil deposits were discovered near Digboi in Assam. From 1889 to the present day, it has come a very long way.
Even when India is said to be rich in crude oil resources, still majority of demand for petroleum is met by importation, the import-export ratio stood at 80:20 respectively around 2018. The majority of import is made from either Persian Gulf or Venezuela, which have huge oil reserves. According to Statistical Review of World Energy 2020, India is the second biggest oil importer after China and is highly dependent on imported crude oil.
The price of crude oil around the world is estimated by Global price benchmarks such as, For Atlantic basin crude oils, the benchmark is calculated by Brent Crude, while For the prices of New York Mercantile Exchange (NYMEX) WTI Crude Oil, WTI has been given the responsibility and the same has been provided Dubai Crude for Oil in Persian gulf. Every region which has different crude oil products has a different name altogether for Future contracts or contracts to buy depending upon the sour levels or sweetness levels. According to Bloomberg Energy, the price of WTI crude oil was $73.23/barrel which can be converted to Rs.45/litre of finest crude oil in the world. Brent Crude was priced at $75.46 and Dubai crude stood at $59.42 in Q1 of 2021.
From these prices, a sharp question comes to mind that when the buying price of these crude oils are such low, then why we as Indians are paying loads of money to buy a litre of petrol or diesel when the same quantity is been priced at Rs.67 in USA or Rs.68 in Sri Lanka. The Exclusive price of petroleum in the Month of June 2021 has seen a steep rise crossing century mark in several cities in India. When the Union minister of Petroleum and Natural gas was confronted with the reasons for such devastating rise in prices, he quoted two reasons which revolved around “manufacturing countries producing less fuel to gain more profit thus making consumer countries suffer”. Up to an extent, the statement is not totally wrong but given that, the prices of Dubai crude saw steep decline in May 2020, even then the central government did not relax the prices rather it was raised. This Irony gets clarified, when the Indirect taxes associated with Petroleum in India is scrutinized.
Taking a case study of Delhi, where Petrol prices were capped at Rs.84 in January 2021. The base price of the crude oil was Rs.27.37/litre, in which Rs.0.37 per litre was Freight levy, then Excise duty and VAT of Rs.27.74 (charged from dealers) then comes the Excise duty of ₹32.98 per litre and dealer commission which is ₹3.67 per litre further Add VAT or value added tax (including VAT on dealer commission) of ₹19.32 per litre. As can be observed, the indirect taxes are even more than the fuel itself, so why can’t we say that we are only paying taxes in the name of buying fuel. Moreover, these taxes are raised at regular intervals to meet the various expenses, such as central government raising the excise duty by ₹13 per litre on petrol and by ₹15 per litre on diesel in March and May 2020 respectively to meet the expense of coronavirus fight.
Petroleum does not come under essential commodities in India but still without the fuel, the development would come at a standstill. India needs energy for most of the works in the present times when people are locked up at home and majority of work is been carried out virtually thus even for producing such amount of electricity, either fuel or coal is consumed by Thermal Power plants. Also fulfilling the demands of entire nation for cheap fuel might be a tough task but alternatives have to be encouraged by the government not only by oral speeches but by changing Policy.