On Thursday, December 15, Petroleum Minister Hardeep Puri said in the Lok Sabha that six non-BJP-ruled states have not reduced the Value Added Tax (VAT) on petroleum products. This led to a surge in petrol and diesel prices in those states. Puri further said that the central government has reduced excise duty on petroleum products following which some states have reduced VAT.
Minister Puri said that West Bengal, Telangana, Kerala, Tamil Nadu, Andhra Pradesh and Jharkhand have not reduced VAT on petroleum products.
“Some of them charge VAT at the rate of Rs 17, while other non-BJP states charge Rs 32. So there is a difference. When the member stated that today’s price of petrol is Rs 100 per litre in some places (non-BJP states) and Rs 8-10 cheaper in others, he was correct,” Minister Puri said on Thursday.
If the govts of West Bengal, Tamil Nadu, Telangana, Andhra Pradesh, Kerala & Jharkhand reduce VAT on fuel, the prices of Petrol & Diesel will reduce for consumers in these states.
— Hardeep Singh Puri (@HardeepSPuri) December 15, 2022
People in these states have to pay more because their state govts continue to levy heavy VAT. pic.twitter.com/eDmfblizuZ
Puri also asserted that petrol prices in India are lowest in comparison to several other countries despite the upheavals in the international markets.
He stated that three public sector oil marketing companies (OMCs) IOCL, BPCL and HPCL have collectively lost Rs 27,276 crore as a result of high crude prices in international markets as prices of petrol and diesel have not been increased since 6 April 2022.
While the average price of crude oil in India increased by 102% (from $43.34 to $87.55) between November 2020 and November 2022, retail prices of petrol and diesel in India increased by only 18.95% and 26.5%, respectively, Puri detailed.
According to Puri, India imports more than 85% of its crude oil needs. As a result, petrol and diesel prices in the country are linked to their respective prices in the international market.
Hardeep Puri also stated that the Central Government reduced excise duty on two occasions, in November 2021 and May 2022, in order to keep fuel prices reasonable and protect Indian consumers from the impact of high international crude oil prices.
“I suggest that opposition MPs press their state governments to reduce VAT so that they can join the mainstream celebration,” he said.
On prices of domestic LPG, Puri said India imports 60 percent of its domestic LPG consumption and the price of LPG depends on Saudi Contract Price (CP). CP is the benchmark of the international price of LPG.
Saudi CP increased from 236 USD/MT in April 2020 to 952 USD/MT in April 2022 and is still at high levels today.
However, he stated that the government is still adjusting the effective price to consumers for domestic LPG.
The government recently approved a one-time compensation of Rs 22,000 crore to public sector oil marketing companies (OMCs) to compensate for huge losses on domestic LPG sales.
It is pertinent to mention that ever since the war between Ukraine and Russia had started in February this year, the international crude market has faced major challenges owing to sanctions against Russia by the West for initiating war against Ukraine. Russia is a major supplier of crude oil to the global crude market.
On December 3, the Group of Seven nations (G7) and the European Union (EU) imposed a price cap of $60 per barrel on Russian crude.
India, which has been buying Russian crude at a 40-50 percent discount despite the West’s pressure has so far managed to keep the Indian market from the negative impact of the ongoing conflict between the West and Russia.
India has emerged as the second biggest importer of Russian crude after China in the post-Ukraine war world. India’s imports from the Middle East fell 16.2% to about 2.2 million barrels per day (bpd) in August, while imports from Russia increased 4.6% to about 896,000 bpd. In October, Russia’s share of India’s imports increased to 4.24 million tonnes, or nearly 1 million barrels per day, giving it a 21% share, comparable to Iraq’s and higher than Saudi Arabia’s share of around 15%. In November, India bought 40% of the Russian Urals seaborne export volume.
Hardeep Singh Puri has said that the oil price cap will not have an impact on India. He mentioned that India’s oil import from Russia is very limited and that India now sources oil from 39 countries including Iraq, Saudi Arabia, and UAE, and also exploring trade possibilities in Africa. Other than this, India may also buy more oil from the United States, Guyana, and other countries in the future.
