Crude is now cheaper than water, why is the government not reducing the price of petrol and diesel? Explained in 3 points

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The price of Crude oil, has fallen by more than 60 percent this year to around $ 25 per barrel. If you look at the price per liter in Indian rupee, then it will be around 12 rupees per liter. While the price of one liter of bottled water is running around Rs 15 in the market. That is, crude oil is now being sold cheaper than water. The crude which was at more than $ 70 in January, is now trading around $ 25. Whereas WTI crude has gone below 20 rupees. The question that now arise is that when the prices of crude have fallen so much, why is the government not giving relief to consumers by reducing the prices of petrol and diesel. There has been no change in the prices of petrol and diesel for the last 16 days. Know what the experts are saying on this.

Petrol and diesel prices stable since 16 days
Wednesday is the sixteenth consecutive day when petrol and diesel prices have not been cut or increased across the country. Prior to this, there was a change in prices on 16 March. The oil companies of the country are busy adjusting the excise duty on petrol and diesel increased by Rs 3 per liter. Petrol in Delhi is priced at Rs 69.59 per liter, while in Mumbai it is being sold at Rs 75.30 per liter.

These are the prices of petrol and diesel right now
City petrol / liter diesel / liter
Delhi Rs 69.59 Rs 62.29
Mumbai 75.30 Rs 65.21
Kolkata Rs 72.29 Rs 64.62
Chennai 72.28 Rs 65.71

Why are consumers not getting benefit?
Anuj Gupta, deputy vice president (commodity and currency), Angel Broking, says that it can be understood in two ways. One, the government has got an opportunity to increase inventory with cheap crude. The government can take advantage of cheap crude and collect good amount of stock. On the other hand, there is a situation of lockdown in the country, due to which the consumption of petrol and diesel is very low. In such a situation, if the government oil companies reduce the prices too, then it will not even benefit more consumers. Because of this, the oil companies are not reducing the price right now. These companies are engaged in adjusting the excise duty increased by the government.

Fiscal deficit makes up!
Ajay Kedia, director of Kedia Advisory, says that due to lower crude oil prices, the government still has a chance to reduce its fiscal deficit. India imports about 82 percent of its crude requirements. Due to the fall in crude, India has to spend less foreign currency in the form of dollars. On the other hand, instead of reducing the price of petrol and diesel after the fall in the price of crude oil, the government is also in the mood to increase revenue. But these days, due to less demand in the country, the government is not getting as much benefit as it would have received under normal circumstances.

Mean of increasing inventory
Kedia says that the conditions that have been created will not always be the same. If the lockdown ends completely in America and China, then there will be a sudden increase in industrial activity. Both countries are big consumer countries of crude. The demand for crude will also increase in the rest of the world, due to which there can be a surge in crude again. Anyway, apart from America and Russia, OPEC countries also do not want crude to remain at lower levels. Further, if there is a jump in the prices of crude, then the government can use the increased inventory to reduce its expenditure. At the same time, oil companies can also give its benefit to customers.

Anuj Gupta also believes that India does not want to miss this opportunity of cheap oil and hence it has decided to store more and more crude oil. The government will get the benefit of improving its balance sheet. If there is inventory, the government can easily withstand the pressure of one to two months without increasing the expenditure even if the demand is increased suddenly. However, customers do not expect to get much benefit from this.

There was a huge gain between 2014-2016
The last time the price of crude oil was falling sharply between 2014 and 2016, then the government had a lot of opportunities to fill its treasure. Then the government took advantage of this imposed excise duty to fill its treasury by charging maximum tax through petrol and diesel. The country’s economy also benefited from this. Between November 2014 and January 2016, the central government increased excise duty 9 times and gave relief only once. By doing this, between 2014-15 and 2018-19, the central government earned Rs 10 lakh crore through tax on oil.

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1 COMMENT

  1. Who is going to pay for the slow down in Economy & all the handouts & services the Govt. Is providing during this crisis!!!
    That’s why we will get no reduction!!! In a
    fairly decent economy where growth rate
    is 6/7 % we could question the Govt. but
    now is not the right to do this!!!

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