Sunday, July 15, 2018

On High Oil Price and Government Policy

Surajit Das

Petrol and diesel prices have reached almost Rs. 80 and Rs. 70 per litre respectively in the country today, which is definitely a cause of concern. Since oil enters into the production and transportation of almost all commodities and services, directly or indirectly, the overall price rise is expected with rise in domestic price of oil. Total consumption of petroleum products in India is around 200 MMT (million metric ton) and crude oil production in India is around 36 MMT per annum – the rest we import. Gross import is around 250 MMT plus LNG import was around 6 MMT in 2016-17 and export was around 65 MMT. The domestic price increased mainly because of sharp rise in the international price of oil from US40$ (in the second quarter of 2016) to almost US 80$ per barrel (in May 2018) as well as because of rise in the tax rate on oil from 37.5% (as on 1st September, 2012) to more than 50% (on 19th June, 2018) for petrol and from 20% to almost 40% for diesel, on an average, in India.