Data | Govt. rarely passes on the benefit of falling crude oil price to consumers

Crude oil price has seen the biggest drop since the 1991 Gulf war - but, it remains to be seen if the government will pass the benefit on to consumer

Updated - December 03, 2021 06:50 am IST

Published - March 12, 2020 06:39 pm IST

Pump jacks draw crude oil from the Long Beach Oil Field in Signal Hill, California. Picture for representation.

Pump jacks draw crude oil from the Long Beach Oil Field in Signal Hill, California. Picture for representation.

The dynamic pricing of petrol has not resulted in a fall in retail prices commensurate with crude oil price crashes. Crude oil prices have fallen again lately, coinciding with an economic slowdown, but the high share of central excise duties have resulted in retail prices remaining relatively high.

Lost in translation

Petrol prices in Delhi (red, left-axis) remained above the ₹70/litre mark on March 10. Since late-2014, crude oil has experienced price crashes on many occasions. But this has rarely translated into a reduction in retail petrol prices. This is largely due to the rupee’s depreciation and a high share of excise duties.

image/svg+xml2011201220132014201520162017201820192020Day of Day0510152025303540455055606570758085Price/Ltr0102030405060708090100110120130Crude price Indian basket85654525513090501020122014201620182020Crude oil price Indian basket($/barrel)(Right-axis)In late 2013 too, thepetrol prices wereover the70-mark,but back then, crudeoil prices were abovethe $100-markMar. 10:70.29Mar. 10:$34.52

Centre's high share

The graph shows retail petrol price in Delhi (bar) and the States’ (line, yellow) and the Centre’s (line, red) share of revenue from it. While the States’ share has remained constant, the Centre’s has increased many times after late 2014, peaking in mid-2016. This explains why the retail price never dropped despite a huge crash in oil prices.

image/svg+xml80706040302010Mar. '14Feb.'18Mar. '16Mar. '20Petrol price in ₹Share in %

Tax and cess accrual

Due to an ever-increasing share of the central excise duty on petrol products, the government’s revenue soared while that of the States’ also gradually increased. Graph shows revenue earned by the Centre (blue) and the States (red) in ₹ crore.


States of VAT

Telangana charges the highest VAT/ Sales Tax on petrol as of March 2020. Gujarat, Punjab and Arunachal Pradesh levy the least. The table shows VAT/ Sales tax range for various States as of March 2020.

image/svg+xmlVAT (% range)States<20Gujarat, Punjab, Arunachal>=20 & <25J & K, Tripura, Haryana, Bihar,Jharkhand, Meghalaya, Goa, Mizoram>=25 & <30Delhi, U.P, Maharashtra, Odisha,Chhattisgarh, H.P., Manipur, Nagaland,Sikkim, Uttarakhand, W.B.>=30 & <35T.N., M.P., Assam, Karnataka, A.P.,Kerala, Rajasthan>35Telangana

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