It’s a gas! Why petrol and diesel prices are at an all-time high and why they’ll go higher still

Why are the prices of petrol and diesel, what Americans collectively call gas, short for gasoline, getting higher and higher, with petrol hitting a record-breaking peak of Rs 100 per litre in parts of India?

God only knows. That is the opinion of FM Sitharaman who has attributed the soaring rise in fuel prices to ‘Dharm sankat’, or ‘Divine predicament’, visited upon us by the Almighty.

However, the devil is said to be in the details, and taking a look at the details of the cost the consumer – you and I – ends up paying for fuel suggests that it’s not God but the Devil, in the avatar of multiple taxes, who is responsible for the ruinously high cost of gasoline.

In Delhi the price charged to dealers is Rs 32.10 per litre for petrol, and Rs 33.71 per litre for diesel, excluding excise duty and VAT. Excise duty adds Rs 32.90 per litre to petrol, and Rs 31.80 to diesel.

The dealer gets a commission of Rs 3.68 per litre for petrol, and Rs 2.51 for diesel. Added to this is not a single but a double VAT, of Rs 20.61 for petrol and Rs 11.68 on diesel, which is a tax not only on the fuel but also on the dealer’s commission, calculated to make the consumer say ‘VAT the hell!’ So, in Delhi petrol ends up costing Rs 89.29, and diesel Rs 79.70, the comparable prices in Mumbai being Rs 96 and Rs 86.98.

Wouldn’t it be more logical to apply PM Modi’s Good and Simple Tax, GST, to fuel to make prices uniform across the country, and maybe bring them down a notch or so?

No, it wouldn’t. Because then where would the states get money to roll out populist schemes to win the next round of assembly elections scheduled for March and April?

But with fuel prices so high, transport costs will also rise, leading to inflated food prices. They will, but, hey, no problem.

The states will then introduce another populist scheme, that of food subsidy, to take care of that. And where will this extra money come from? Why, from even higher fuel prices, of course. And so on.

It’s enough to make one sick to the stomach with an acute case of gas trick infection.



This article is intended to bring a smile to your face. Any connection to events and characters in real life is coincidental.


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