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Opposition spreading misconception that Modi govt is responsible for high petroleum prices
Politics is a game of perception. That's why politicians and political parties always try to sell a perception to the public irrespective of the merit of an issue or subject.

The party which is able to sell a credible perception (irrespective of the fact whether it's true or not), generally gets electoral benefit. At present, Narendra Modi-led BJP is floating credible perceptions whereas just by opposing anything and everything the opposition parties are failing measurably in generating some credibility for themselves.

Recently, the opposition parties have been spreading misconception that the Central government is looting common people by steeply hiking the prices of petroleum products. They never forget to compare the crude oil, petrol, diesel and gas prices during UPA rule and the present NDA rule, although the prices of crude oil and petroleum products are not exactly directly proportional. These also include refining costs, transportation and many other incidental expenses that never reduce along with reduction on the price of crude oil.

It must be noted that when the GST was implemented by the Central government, the first condition of various state governments was to keep petroleum products and wine out of the purview of GST. It can also be said that Central government was compelled to agree to this condition so that GST bill could somehow pass through. Had petroleum products come under the ambit of GST, their prices would have been much lower. But since states generate huge revenue by selling petroleum products as well through sale of alcoholic beverages, they weren't ready to spare such milking cows.

Then petro-politics is a favourable way to blame the Central government for price hike because all petro refineries are under Central government's control. Public can be fooled that it's the Central government which is responsible for the high prices. But is that a fact? Let's see the breakup of petrol and diesel prices as below.

Simplified Calculation Chart for Petrol and Diesel Prices in New Delhi - (24th August 2017)

 Petrol Price* Diesel Price Calculation* 
International Price of Crude Oil with Ocean Freight (as on 24th August 2017)   50$ or s 210 per Barrel  50$ or Rs 210 per Barrel
 1 Barrel of Crude Oil  159 Litre  159 Litre
 Crude Oil  - Cost per Litre  Rs 20.19 per Litre  Rs 20.19 per Litre
 Basic OMC Cost Calculation   
 Entry Tax, Refinery Processing, Landing Cost & Other Operational Costs along with Margins  Rs 6.03 per Litre  Rs 6.38 per Litre
 OMC Margin, Transportation, Freight cost  Rs 3.31 per Litre  Rs 2.55 per Litre
 Basic Cost of Fuel after Refining Cost  Rs 29.53 per Litre  Rs 29.12 per Litre
 Additional: Excise Duty as Charged by Central Government  Rs 21.48 / Litre on Petrol  Rs 17.33 / Litre on Diesel
 Pricing Charged to Dealers before VAT  Rs 51.01 per Litre    Rs 46.45 per Litre
 Calculating Dealer Retail Price - Base Location Delhi   
 Commission to Petrol Pump Dealers  Rs 3.23 per Litre  Rs 2.17 per Litre
 Fuel Cost Before VAT (rounded off for approximation)  Rs 54.24 per Litre  Rs 48.62 per Litre
 Additional:VAT (Varies from State to State - 27% on Petrol & 16.75% on Diesel + 25p as Pollution Cess with Surcharge)  Rs 14.64 / Lit on Petrol  Rs 8.44 / Litre on Diesel
 Final Retail Price as on 24th August 2017 -(calculation)  Rs 68.88 per Litre  Rs 57.06 per Litre
   * - Prices as on 24th August 2017

Source (

Now the excise duty levied by the Central government is Rs 21.48 per litre for petrol and Rs 17 .33 per litre for diesel. From Central taxes states get 42 per cent which works out to Rs 9.02per litre for petrol and Rs 7.28 per litre for diesel. If you add this to VAT, then Delhi state gets a total Rs 23.66 per litre for petrol and Rs 15.72 per litre for diesel. And Centre gets Rs 12.46 per litre from petrol and Rs 10.05 per litre for diesel. Now just see how the state is getting more tax from petroleum products than the Centre although the Centre is blamed for the price hike. Moreover, I haven't taken into account another 15-20 per cent of Central tax that is spent by states in the funding projects such as agriculture, rural road connectivity (PMGSY) and infrastructure, MNREGA and others.

The comparison above is for state of Delhi only. There are other states that charge around 40 per cent VAT also which hikes the petroleum prices even more. Thus, more the VAT more would be the price of petrol and diesel. But then, states particularly ruled by the opposition still blame the Centre for looting the public.

The BJD observed a violent hartal on September 18, 2017 protesting high prices of petroleum products. But the question is, if the opposition parties are so concerned for the public, why don't they reduce or abolish VAT on petrol?

Recently the petroleum minister appealed to the states through GST council to bring petroleum products under the ambit of GST. If petroleum products are levied with 28 per cent GST then the cost would be come down to Rs 37.8 per litre for petrol and Rs 37.27 per litre for diesel. But then, both state and Central governments will get equally only Rs 4.13 per litre for petrol and Rs 4.09 per litre for diesel. This is not acceptable to the states so that's why no state government has responded to the Union Petroleum Minister's appeal.

Editorial NOTE: This article is categorized under Opinion Section. The views expressed in this article are solely those of the author and do not necessarily represent the views of In case you have a opposing view, please click here to share the same in the comments section.
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