The government has pinned the blame on the ongoing Russian invasion of Ukraine as the primary reason for the steep rise in the domestic fuels including petrol, diesel, and LPG (Liquid Petroleum Gas), but there is more it than what meets the eye.
Based on Purchasing Power Parity (PPP) dollar estimation, the LPG per litre price in India is said to be the most expensive compared to any other country in the world, The Times of India reported.
For the uninitiated, PPP, as the name suggests, shows us how much local currency can get you a commodity. For instance, the one dollar, based on the latest foreign exchange rate is around Rs 75.85. So, In India, a dozen of eggs is priced around Rs 99 and when converted back to dollars, comes to around $1.31. However, the price of the same commodity in the US costs $3.32, approximately Rs 252.
There is definitely a difference in how the local currencies work and how the commodity prices such as fuel in a particular country differ vastly from others around the world.
It should be noted that a US dollar in the international market averages around Rs 22.6 and this is the value, by which India and others purchase oil and gas from the producer country.
At the time of writing this article, the Brent Crude Oil price per barrel was $101.2 per barrel (around 159 litres). So, India is paying around Rs 2,287 (based on international dollar value) per barrel and that translates to Rs 14.38 per litre of crude oil.
So, in addition to the cost of transportation and filtering crude into petrol, diesel and other byproducts, the government adds cess and taxes to the final price. Now, a litre of petrol costs Rs 120 (in select regions of India), which comes to around $5.2 (international dollar value). This apparently makes it the third most expensive per litre fuel cost. Sudan ($8) and Laos ($5.6) are said to be two other nations to have more expensive fuel prices than any other among the 157 countries.
Similarly, with $4.6 (international value) a litre for diesel, India is ranked the world's 8th highest.
However, the LPG price in India, which is priced at $3.5 (international) a litre is touted to be the most expensive cooking fuel in the world.
So, the truth is the tax and cess levied on petrol, diesel and LPG by both the central and state governments are the reason for high costs. If the governments want to lessen the burden, they can reduce the duty on the fuels.
But, again there is this emotional blackmail to the citizens, on how the government is utilising the taxes to offer free vaccination and funding free ration to more than 80 crore people in the country, and many other welfare programmes.