Why Do Petrol Prices Increase Overnight in India: Who Is Behind It?
Recently, there has been a significant and rapid increase in the price of petrol in India, leading to widespread public concern. This article explores why these price hikes occur overnight and the role of different stakeholders in the process.
The Role of Public Sector Oil Marketing Companies
The increase in petrol prices in India has been primarily managed by the public sector oil marketing companies, such as Oil India, Bharat Petroleum, Hindustan Petroleum, and Indian Oil Corporation. These companies are responsible for the movement and sale of fuel in the country. In a democratic environment, their price adjustments are more transparent and subject to public and regulatory scrutiny. However, in a more controlled or private sector, such rapid and significant price increases would likely be prohibited due to the potential public backlash and regulatory oversight.
The Influence of the International Oil Market
The international oil market plays a crucial role in determining the prices of petrol in India. Despite recent dips, the price of crude oil remains a significant determinant of the retail price of petrol. It is essential to understand that the price of crude oil has fluctuated significantly over the years. For instance, in 2008, the price of crude oil was as high as $145 per barrel, which spiked the petrol prices to approximately ?103 per litre in India at that time. In contrast, today, the price of crude oil is around $71 per barrel. Although this is a significant drop, it does not reflect the consistent rise in the price of petrol in India, indicating other factors at play.
Other Factors Behind Price Hikes
One of the primary reasons for the sustained increase in petrol prices in India is the high taxes levied by both the central and state governments. In an environment where the political landscape is stable, like after elections, the focus often shifts from regulatory and policy changes to maintaining a stable price environment. However, the burden of these taxes is often passed on to the consumers, resulting in higher retail prices. Another significant factor is the impact of the 7th Pay Commission, which led to a substantial increase in the salaries and wages of central and state government employees. This was a one-time adjustment that increased the cost of living for a significant portion of the population.
In some cases, it has been observed that the prices of fuel in neighboring countries, such as Nepal, are lower than in India. This discrepancy brings into question the efficiency and transparency of the price-setting mechanisms in India. For instance, if Nepal is importing petrol from India and selling it at a lower price, it suggests that the cost of production and distribution in India might be cheaper. However, the consumer price in India remains high, indicating a need for greater transparency in how these prices are set and regulated.
Conclusion
The rapid and significant increase in petrol prices in India cannot be attributed solely to the price of crude oil or even taxes. It is a complex interplay of various factors, including the role of public sector companies, the influence of the international market, and the impact of government policies and commission adjustments. Understanding these factors can help consumers and stakeholders better navigate the fuel market and advocate for transparent and fair pricing mechanisms.