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Fuel Price Hike: This is how Narendra Modi government is fuelling the price of petrol and diesel

Waquar Ahmed | Updated on: 13 September 2018, 12:07 IST

As the country has been reeling under the fuel price hike and the Modi government is in duck over the issue, so far the Central government did not take any action to minimize the fuel price pain of common people. Despite nationwide protest Bharat Bandh called by Opposition parties led by Congress party over the fuel price hike, the government did not take any serious action over the issue except for some statements from the ministers.

However, it is necessary to understand the role of this BJP-led government in contributing to the skyrocketing of fuel prices. The country imports more than 80 percent petrol and diesel from other countries like Iran. So, the fuel price in the country depends on the price of the crude oil at which the government buys from other countries.


So, when Narendra Modi government came in power in May 2014, the price of crude oil was $106.85 per barrel. During that time, the price of petrol and diesel in Delhi was Rs 71.41 per litre and Rs 56.71 per litre respectively.

After sometime, the price of crude oil started to fall down reaching $28.1 per barrel in January 2016. This significant fall in the crude oil price should have made an impact on the fuel price and it should have decreased but it did not happen.

The fuel price remained stagnant or increased because the government took all the benefits from that by increasing the excise duty on petrol and diesel. And, the government did not let people get benefit from the significant fall in the price of crude oil.

Not only Central government but also states increased the sales tax/value added tax on petrol and diesel. This increase of taxes from both Central and state governments on petrol and diesel hugely contributed to the skyrocketing of the fuel prices.

Now, when the crude oil is at $76.22 per barrel, this is about 28.7 per cent lower than the price of crude oil was in May 2014. Yet, the price of petrol and diesel is now higher than that time standing at Rs.80.73 per litre and Rs 72.83 per litre respectively.

As now people are outraged at the fuel price hike and the Opposition parties are up in the arm, some states came forward to cut down taxes on it but the central government refused to do so. However, everyone’s eye is on the meeting called by Prime Minister Narendra Modi to review the fuel prices.

If the government does not cut down taxes on the petrol and diesel, the price may further increase as the United States President Donald Trump imposed sanctions on Iran which is one of the biggest oil exporters to India. The US is also pressing other countries including India to cut off ties with Iran.

If India stops buying crude oil from Iran, the fuel price will shoot up. The other situation is that as Iran will reel under economic sanctions, it will increase the price of crude oil to deal with its economic crisis.

First published: 13 September 2018, 12:07 IST