Petrol is now retailing above Rs 90 per litre in all major cities including Delhi and is on the verge of crossing Rs 100 in major cities. It has already hit a century in some circles. Diesel, too, has climbed to levels never seen before in the country. The situation is so bad in some places that people are walking extra miles to buy cheaper fuel or smuggling it from neighbouring nations. A recent report indicated that some people in Bihar’s Araria and Kishanganj region are crossing the border to smuggle petrol from Nepal, The historic rise in fuel prices will definitely have a devastating impact on the economy, which is still recovering from the Covid-induced crisis.
HOW FUEL PRICE HIKE AFFECTING?
There are many ways in which rising fuel prices can impact citizens in the country. The initial impact of the rise will be felt by people who own personal vehicles. In india today article few people with personal vehicles spoke And All of them agreed that the recent hike in prices have increased their monthly budget on fuel, while some of them said they are ready to cut their average monthly fuel consumption to avoid spending more, The high rate of fuel prices will have an impact on the automotive sector a large source of employment in the country as vehicle sales may see a sharp drop.
Passenger vehicles and two-wheeler sales have already witnessed a dip in January 2021 and the numbers for this month could dip lower. A further contraction in demand for vehicles will have a major impact on the automotive industry and the lakhs of MSMEs that supply goods to the sector.
Lower demand will, therefore, lead to widespread job losses in the auto and ancillary sectors, Cascading effect of fuel price rise, The rising fuel prices in India will also have a cascading effect on businesses spread across various sectors, ultimately impacting citizens.
For starters, people who do not own a personal vehicle will be impacted as they will have to pay more towards availing public transport. The public transportation sector is already mulling a hike in rates in view of rising operational costs. Companies engaged in the logistics and transportation of goods are also expected to increase their service rates soon due to the fuel price hike. Demand for increasing product delivery rates has already put consumer-oriented companies in a tough spot. According to an Economic Times report, transporters and freighters are seeking a 10-15 per cent increase in freight costs.
Considering that most products and goods that people use on a daily basis are transported from different parts of the country, their costs are likely to rise further. Simply put, from the food you order to the vegetables and fruits you buy, everything is likely to get costlier.
WHY FUEL PRICES ARE RISING IN INDIA?
Firming of international crude oil rates and extremely high taxes levied on fuel are the key reasons behind the latest round of petrol and diesel price hike in the country. International crude oil price including the Indian Basket of Crude, which comprises Oman, Dubai and Brent crude. Global crude oil prices have been increasing after Organisation of the Petroleum Exporting Countries (Opec)-plus decided to continue supply curbs.
Being the third-largest importer of oil in the world, the recent firming of international crude oil prices have severely impacted India, where citizens are paying extremely high rates for fuel in comparison to neighbouring countries. As of today, Brent Crude oil rate stands at $63.21 per barrel.
LAYER OF TAXES
But the increase in international crude oil rates is not the only culprit behind the exorbitant fuel prices in India, evident from the fact that the country’s fuel rates were significantly lower in the past even at a time when international crude oil prices were higher than current levels. Therefore, the biggest reason behind higher fuel prices in the country is the high rate of central and state taxes.
Even when international crude oil prices plummeted in 2020 due to lower demand, Indians kept paying higher rates for petrol and diesel due to the various taxes levied. At the moment, Indians pay one of the highest taxes on fuel in the world, Since India follows a dynamic system for altering fuel rates, oil marketing companies are mostly responsible for the recent hikes and the government has no control over it. However, the government does impose a tax on the base price of fuel.
The Narendra Modi-led central government has pinned the blame of higher fuel prices on the previous government which was in power before 2014.
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