Consumers Reeling under Increasing Fuel Prices while Govt, Oil Marketing Companies Earning Higher Revenues
Moneylife Digital Team 19 July 2021
While consumers are reeling under the ever-increasing prices of petrol, diesel and domestic liquified petroleum gas (LPG) cylinders, the Union government and State-run oil marketing companies (OMCs) are earning higher revenues and profits, shows data submitted in the Lok Sabha. As on Monday, petrol continues to be sold for Rs101.84 per litre and diesel at the unchanged price of Rs89.87 a litre in New Delhi. In Mumbai, where petrol prices crossed the Rs100-mark for the first time ever on 29th May, the fuel price is at Rs107.83 per litre. Diesel price in the metro city is also at Rs97.45, the highest among metros. On 1st July, OMCs increased by Rs25 the prices of LPG refill cylinders. With this latest hike, LPG prices now have increased by Rs140 per cylinder in the past six months. 
 
In a written reply, Rameswar Teli, minister of state in the ministry of petroleum and natural gas, says, in FY20-21 the Union government earned Rs3.45 lakh crore as central excise duty from petroleum products, like petrol, diesel, aviation turbine fuel (ATF), natural gas and cess on crude oil. For the previous two fiscal years, the government had earned taxes of Rs2.35 lakh crore in FY18-19 and Rs1.97 lakh crore in FY19-20. 
 
 
According to the minister, prices of petroleum products in the country are benchmarked to international product prices. "Generally, the price of petroleum products in the country are higher or lower than other countries due to a variety of factors, including the prevailing tax regime and subsidy compensations by the respective governments, the details of which are not maintained by the government," he says. 
 
Responding to a question about bringing fuel prices under the regime of the goods and service tax (GST), Mr Teli, says, at present there is no proposal to bring these goods under GST. He says, "Article 279 A (5) of the Constitution prescribes that the GST Council shall recommend the date on which the goods and services tax be levied on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel (ATF), also as per the Section 9(2) of the CGST Act, inclusion of these products in GST will require recommendation of the GST Council. So far, the GST Council has not recommended inclusion of oil and gas under GST."
 
From 4 October 2017 t0 2 February 2021, the government had increased the central excise duty to Rs32.90 per litre from Rs19.48 per litre on unbranded petrol and to Rs31.80 per litre from Rs15.33 a litre for diesel, the data shared by the minister shows. 
 
 
Out of the first 104 days till 13 July 2021 in FY21-22, State-run OMC increased prices of petrol on 39 occasions, while diesel prices were increased 36 times. Prices of petrol and diesel were reduced one and two times, respectively, during the same period. For the remaining days, there was no change in prices.
 
 
Due to the increase in fuel prices, three OMCs, Indian Oil Corp Ltd (IOCL), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) are earning robust profit after tax (PAT). In fact, these three OMCs have increased their PAT by almost 60% to Rs51,542 crore in FY20-21 from Rs30,055 crore in FY18-19. FY19-20 was a lacklustre year for these OMCs as it could record a profit of just Rs6,633 crore, the data submitted in the Lok Sabha shows.
 
The Union government earns more money by way of dividend from the State-run companies. For example, during FY20-21, BPCL was the biggest contributor in paying dividend to the government. BPCL paid a dividend of Rs8,759.71 crore and was followed by IOCL with Rs5,817.95 crore dividend paid to the exchequer during past fiscal year.
 
 
Petrol prices in all metros have now crossed the Rs100 per litre-mark and OMC officials say that if international oil prices continue to firm up, rates may rise further. 
 
With the government not supporting even cooking gas consumers in the time of rising prices, consumers are bearing the brunt of increase in both their transportation and cooking expenses during the difficult period of the pandemic. 
 
While consumers’ focus has remained on petrol and field prices, the cooking gas price has gone almost unnoticed. It had risen sharply by over Rs100 a cylinder in February 2021 itself to Rs794 from Rs694 a cylinder. In February, LPG prices were revised thrice — Rs25 on 4th February, a Rs50 per cylinder hike on 15th February and another hike of Rs25 on 25 February 2021.
 
 
At present, a domestic cylinder weighing 14.2kg costs Rs834.50 in Delhi. In Mumbai and Kolkata too, the price is Rs834.50 per cylinder while in Chennai, one non-subsidised LPG cylinder costs Rs850.50.
 
On a positive note, global crude price has softened over the past few days with OPEC agreeing to pump more oil into the market from August. Also, as a new wave of COVID continues to build across the globe, the concerns on demand destruction is also being anticipated.
 
However, the Union government seems to be reluctant to let off the easiest route to garner more revenues either through excise tax or via dividend earned from OMCs, end consumers will have to keep paying higher prices for petrol, diesel and LPG used at home. 
 
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