{"id":35861,"date":"2023-06-11T12:48:26","date_gmt":"2023-06-11T07:18:26","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=35861"},"modified":"2025-04-21T12:53:17","modified_gmt":"2025-04-21T07:23:17","slug":"omcs-may-take-call-on-fuel-prices-if-crude-stays-stable-h-s-puri","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/omcs-may-take-call-on-fuel-prices-if-crude-stays-stable-h-s-puri\/","title":{"rendered":"OMCs May Take Call on Fuel Prices If Crude Stays Stable : H S Puri"},"content":{"rendered":"<h3><strong>What\u2019s in today\u2019s article?<\/strong><\/h3>\n<ul>\n<li><strong>Why in News?<\/strong><\/li>\n<li><strong>Fuel Pricing Mechanism in India<\/strong><\/li>\n<li><strong>Why are Fuel Prices Different in Each State?<\/strong><\/li>\n<li><strong>Excise Duty on Fuel Prices<\/strong><\/li>\n<li><strong>Limitations on Tax Reduction on Fuel<\/strong><\/li>\n<\/ul>\n<p><strong>\u00a0<\/strong><\/p>\n<h2><strong>Why in News?<\/strong><\/h2>\n<ul>\n<li>If international crude rates stay stable, Indian Oil Marketing Companies (OMCs) will be able to take a call on reducing petrol and diesel prices, said Petroleum Minister Hardeep Singh Puri.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Fuel Pricing Mechanism in India<\/strong><\/h2>\n<ul>\n<li>Petrol prices were deregulated in 2010 and Diesel prices were deregulated in <strong>2014<\/strong> i.e. now <strong>Oil Marketing Companies (OMCs) determine the prices of these products<\/strong>.<\/li>\n<li>These prices are not determined by the actual costs incurred by the OMCs such as Indian Oil, HPCL and BPCL on crude oil sourcing, refining and marketing.<\/li>\n<li>Rather, a formula \u2014 <strong>Trade Parity Price (TPP)<\/strong> \u2014 is used to price these products.<\/li>\n<li><strong>TPP Formula:<\/strong>\n<ul>\n<li>TPP is based on the calculation that 80 per cent of petrol and diesel is imported into India and 20 per cent is exported.<\/li>\n<li>So, petrol and diesel prices in India are determined based on prices of these fuels in the international market \u2014 and not on the basis of crude oil prices.<\/li>\n<li>While international petrol and diesel prices generally move in line with crude oil prices, it need not always be the case, given that demand and supply dynamics could be different.<\/li>\n<\/ul>\n<\/li>\n<li>From June 2017, the <strong><u>pricing of petrol and diesel is done through a daily pricing mechanism, based on a 15-day rolling average international rate<\/u><\/strong>.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Why are Fuel Prices Different in Each State?<\/strong><\/h2>\n<p>&nbsp;<\/p>\n<p><img decoding=\"async\" src=\"https:\/\/lh5.googleusercontent.com\/hXiy-sMlCSfEAv92j3zEVC33umjLCLkqXBWjqSn0K-N7dFs3nXdroX-Nhxt51qJYWMZAE9UPL-dj0vMxxQppR_I6UJmBxwgb2jb06wJ1T2JGnmFa8NXwIF2gr_8w86grWk-Nmiuk6k2guGS_8eAFYdw\" alt=\"\" \/><\/p>\n<p>Image Caption: Fuel Prices in Different States<\/p>\n<ul>\n<li>Apart from TPP, there are three other factors that determine the price of petrol and diesel in India:\n<ul>\n<li><u>Excise duty charged by the Central Government<\/u><\/li>\n<li><u>Value-Added Tax (VAT) charged by the State Governments<\/u><\/li>\n<li><u>Dealer commission to the gas stations<\/u><\/li>\n<\/ul>\n<\/li>\n<li>In some states, fuel prices attract higher VAT compared to others, which further increases the price disparity.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Excise Duty on Fuel Prices<\/strong><\/h2>\n<ul>\n<li>The excise duty levied on petrol and diesel consists of two broad components:\n<ul>\n<li><strong>Tax component<\/strong> (i.e., basic excise duty), and<\/li>\n<li><strong>Cess and Surcharge component<\/strong>.\u00a0<\/li>\n<\/ul>\n<\/li>\n<li>Of this, <strong><u>only the revenue generated from the tax component is devolved to states<\/u><\/strong>.\u00a0\n<ul>\n<li>Revenue generated by the centre from any cess or surcharge is not devolved to states.\u00a0<\/li>\n<\/ul>\n<\/li>\n<li>Currently, the <strong>Agriculture Infrastructure and Development Cess<\/strong>, and the <strong>Road and Infrastructure Cess<\/strong> are levied on the sale of petrol and diesel in addition to the surcharge.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Limitations on Tax Reduction on Fuel<\/strong><\/h2>\n<ul>\n<li><strong>Weakens the Fiscal Deficit:<\/strong>\n<ul>\n<li>A cut in excise results in the fiscal deficit widening.<\/li>\n<li>A <u>cut of Rs 1 in petrol and diesel can result in an estimated loss of Rs 25,000 crores every year to the government<\/u>.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Hinders Economic Development:<\/strong>\n<ul>\n<li>A reduction in revenues (like excise cut on fuel), means the planned expenditure of the government has to be curtailed.<\/li>\n<li>This can reduce the government&#8217;s outlay in crucial areas, including infrastructure and healthcare.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Reflects Poorly:<\/strong>\n<ul>\n<li>Frequent policy changes is not welcome by investors and hinders easy flow of capital, whether through FDI or through capital inflows.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Under watch from Credit Rating Agencies:<\/strong>\n<ul>\n<li>Each time the government acts to reduce excise on petrol and diesel, they come under the glare of the global rating agencies.<\/li>\n<li>Take the case of the recent cut in excise on petrol and diesel by Rs 1 per litre.<\/li>\n<li>One of the leading credit rating agencies was quick to point out that it is &#8220;credit negative&#8221; and could result in the fiscal deficit rising by 0.1 per cent.<\/li>\n<li>No government would want a sovereign rating downgrade from the global rating agencies, which could result in an outflow of foreign capital.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<hr \/>\n<h3><strong>Q1) Which product has both excise duty as well as GST?<\/strong><\/h3>\n<p>The Karnataka High Court in October 2022 had ruled that the Union government is entitled to levy Central GST (CGST) as well as excise duty on tobacco and tobacco-derived products.<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>Q2) What is Surcharge in Income Tax?<\/strong><\/h3>\n<p>Income tax surcharge is an additional charge payable on income tax. It is an added tax on the taxpayers having a higher income inflow during a particular financial year.<\/p>\n<p>&nbsp;<\/p>\n<hr \/>\n<p><strong>Source:\u00a0<\/strong><a href=\"https:\/\/economictimes.indiatimes.com\/industry\/energy\/oil-gas\/petroleum-minister-hardeep-puri-on-what-might-prompt-oil-companies-to-cut-fuel-prices\/articleshow\/100897173.cms?from=mdr\" target=\"_blank\" rel=\"nofollow noopener\"><u>OMCs May Take Call on Fuel Prices If Crude Stays Stable : H S Puri<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Fuel prices in India are determined by the Oil Marketing Companies (OMCs).<\/p>\n","protected":false},"author":5,"featured_media":35862,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-35861","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/35861","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=35861"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/35861\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/35862"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=35861"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=35861"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=35861"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}