Why Petrol and Diesel Prices are increasing in India – You must know


Petrol and diesel rates are reached the highest level till now in India. Most of the consumers suffering to take these kinds of situations.

People always blame/critics current government who ever in rule for this petrol and diesel rates hikes but people do not care to see the ground realities and the real basic reasons for the price increase. If there would be good understanding of the fundamental causes for the present scenario, there would be constructive debate on the subject, instead of throwing mud at the face of the current government.

Here is Top Reasons why petrol and diesel rates gone up

1. External factors behind fuel price rise

The factors responsible for drop in production of crude oil have caused a spike in fuel prices in India.

Generally India always import crude oil from OPEC (Organisation of the Petroleum Exporting Countries), for the past years they had promised that it will raise production by one million barrels per day, which was not raised said by Union petroleum and natural gas minister Dharmendra Pradhan

Apart from that, crises in countries like Venezuela and Iran are increasing. There is a pressure on oil prices due to decrease in production.

Secondly, global currencies have weakened against the US dollar,” said by Union petroleum and natural gas minister Dharmendra Pradhan.

2. Crude Oil Production in India

India’s production of crude oil is now nearly stagnant at the level of around 36 to 37 milion tonne per annum. The production is fluctuating from one year to another but it is certainly not significantly increasing. As the exploratory efforts to open new oil wells are continuing, the production in the existing wells are inevitably declining.
The efforts of Modi government to take up exploratory efforts for new oil wells are being resisted in several places. The most recent agitation against the crude oil exploration was at Neduvasal in Tamil Nadu, where the government has been forced to give up it’s exploratory efforts. Those who are complaining about the price increase of petrol and diesel are the same people who are blocking the new exploratory efforts to boost the crude oil production.

3. Rising import of crude oil and consumption

Indian import of crude oil is now well over 220 milion tonne per annum and the import has been increasing at the rate of 7 to 8% during the last several years.
The consumption of petrol and diesel are steadily increasing , which has to be necessarily met by increase in import of crude oil to produce petrol/ diesel in the petroleum refineries. The automobile sector has a significant share of petrol and diesel consumption in India and nobody is willing to curtail the use of automobile to the extent possible.

India in helpless situation

India, with near stagnant domestic production of crude oil and steady increase in crude oil import, is highly vulnerable to the international crude oil price scenario.
As of now, government of India is helpless in facing the situation. Any government in India will inevitably face such situation in the coming years also.

Critics Suggestions

Critics of the recent diesel and petrol price rise in India argue that the government should slash down the excise duty on petrol and diesel and give up it’s revenue to some extent to reduce the price of petrol and diesel. In today’s conditions, even if the government would do this by sacrificing it’s revenue to some extent, the impact on price fall of petrol and diesel, would be only by around Rs.10 to 15 per litre, as the government has the option of reducing the duties only to a limited extent , as it cannot reduce it’s income drastically.

It should also be noted that in spite of the steady increase in price of petrol and diesel during the last few years, the consumption of petrol and diesel has been increasing in India,particularly for transportation. Can one say that this scenario indicate the affordability of the consumers to pay high price for petrol and diesel for transportation these days?

Alternate Solution
The Modi government has certainly been taking steps to find alternate source of energy such as solar and wind power. In the last four years, the capacity of solar power generation in India have been increased from 1500 MW to around 23,000 MW now, which is a remarkable achievement. The capacity of the wind power has also gone up substantially. But, all these have only limited impact, in view of the very large requirement of energy., which is being met by petroleum resources now.