Since April this year, price of crude oil that India imports has fallen from $89.44 per barrel to $73.59 per barrel. That is a drop of nearly 18%. It is this oil which is refined and sold in India as petrol, diesel and various other petro-based products.

Since 2010, the government has supposedly withdrawn from fixing the retail price of petrol (diesel since 2014) claiming that prices will be determined by the market. That means that it should be determined by international prices. The government often claims that petrol/diesel prices are high because of high global prices.

So, with crude oil prices falling, it is but natural to expect that retail prices of petrol and diesel should fall. But no! Retail prices of petrol and diesel are still the same as they were on 1 April 2024!

That’s because a big hoax is being pulled on the hapless people of the country by the Modi government. When international prices of crude rise, they increase the retail prices here. But when international prices fall, they DON’T reduce the domestic retail prices. To pull off this scam, the government hides behind the three big Oil Manufacturing Companies (OMCs) which are – Indian Oil, Bharat Petroleum and Hindustan Petroleum. 90% of retail market is controlled by these three giants. And here is the thing: they are government owned companies, acting at the directions of the petroleum ministry directly.

In fact, Pankaj Jain, Secretary in the Ministry of Petroleum and Natural Gas openly declared that these companies will “consider reducing fuel prices if the price of crude oil remains low for an extended period”!

For six months crude oil prices have been falling and the top bureaucrat in the petroleum ministry says the government is waiting for an extended period of fall!

The result of these shenanigans is that the government is raking in huge profits on the petroleum account. It is buying crude oil cheaper but selling the refined products at the same old higher prices. The last time petrol and diesel prices were reduced was on March 14, 2024, just a few weeks before the start of Lok Sabha elections. That was a clear move to please the voters, not that it seemed to have had much effect considering the results. Since then there has been no change in retail prices of petrol or diesel.

Burden of Taxation

To get an idea of the kind of profit the government is making from this robbery of the people, have a look at the revenue from taxes and various cesses on petroleum products. According to the Petroleum Planning & Analysis Cell (PPAC) which comes under the Ministry of Petroleum and Natural Gas, last year (2023-24), the total revenue gained by the central government from various taxes, cesses, royalties, duties on petroleum products was a jaw dropping Rs.3.5 lakh crore. Note that the bulk of this gross revenue comes from excise duties, amounting to Rs.2.74 lakh crore that is, about 78% of the total. Since the Modi government came to power in 2014, it has discovered petroleum taxing as a gold mine for itself. It has so far raked in a phenomenal Rs.26.74 lakh crore from taxing petroleum products alone.

Tax revenue from petroleum products is a form of indirect taxation – it is transferred to the people in a hidden way, as a cost of the goods they are buying. It cascades down the economy through various channels – farmers’ input costs go up because diesel prices go up; commuters have to pay more because transport costs go up; vegetables, fruits and even food grain costs go up as transporting them becomes costlier.

A government that claims to be working for the benefit of the poor and needy people of the country is thus secretly burdening them with more costs, increasing prices of essential commodities and services, and thus pushing them further into economic distress.