What made the government to hike the prices of petrol when the crude price is lesser than 2008 price.?

Price of petrol in 2008 was Rs.49.61 and crude price was $ 92.16 per barrel.

Today the petrol price is Rs.63.36 and the crude price is $ 91.95 per barrel.

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Update:

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All have given very good points on the issue.

As rightly said by Madhukar ji, only exploring the alternate energy energy will be the solution. But again the prices of such energy is not controlled by Government, we have to suffer only.

There are some points raised by many answerers in the links below from an article by Mr S Pushpavanam, Secretary, Tamilnadu Consumer Protection Group, Tiruchy.

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12 Answers

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  • 9 years ago
    Favorite Answer

    I hope the following answer of Bala venkat clarifies your doubt:

    Prices of petro products are frequently hiked by Govt of India under the pretext that the price of Crude has been hiked in the global market. Actually the value of various state and central taxes, etc levied comprises > 50% cost of petro products. India is one of the countries that levies high taxes on petro products.

    OPEC countries earned 3346 billion $ by export of crude oil in 2004-08 period and the G-7 countries that imported the crude earned 3418 billion $ through taxes on petro products in the same period! In other words, the importing countries raised more value than the export countries, from the taxes on petro products domestically!

    It is frequently said that Govt is subsidizing petro products and that the Govt and Oil companies are bearing huge financial burden on this account. This is totally untrue. During last year (2009-10), central and state govts collected a sum of Rs 183861 crores from excise and taxes. In the same year, the ONGC earned Rs 16767 crores, IOC Rs 10220 crores, HP 1301 crores, BP 1837 crores, Oil India 2610 crores as profits!!!

    The aggregate profit of the oil companies and corporation was Rs 32735 crores!! This was the final estimate. Actual profits should have been five times more than this according to experts! Where does all this go? Apart from the extravaganza of the companies, look at the unimaginable wages paid to the staff:

    In IOC, an average worker with 15 year experience annual salary is Rs 8.39 lakhs;

    M. Com graduate drivers are paid Rs 22 lakhs p.a.;

    Guest House keeper (5th class educated) is paid Rs 8.56 lakhs per annum;

    An 8th class studied Attender joined in 1976 is paid Rs 45.99 lakhs!!

    Do you now get an idea as to where the profits of the oil companies go?

    http://in.answers.yahoo.com/question/index;_ylt=At...

    Edit: Actually the above details have already appeared in another question some time last year quoting from following source:

    Article (Tamil) by Mr S Pushpavanam,

    Secretary, Tamilnadu Consumer Protection Group, Tiruchy

    appeared in the ''Tuglak'', Tamil weekly dated 29.09.10

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  • Anonymous
    9 years ago

    The hike in petrol price was necessitated because of increase in prices of crude oil in the international market, Union Finance Minister Pranab Mukherjee said.

    "The price of crude oil in the international market has touched $90 a barrel. Petrol prices have been deregulated already. So the hike in price was in parity with international prices," Mukherjee said.

    While consumers are undoubtedly unhappy and the country's opposition political parties have begun to exploit this unhappiness, the Union government had no option but to hike petrol prices.

    Analysts say that there is no convincing case for subsidising petrol, even if there can still be some case for subsidising diesel and kerosene.

    These are all old arguments that have been gone through for over a decade now. It was the so-called 'R group', headed by economist Vijay Kelkar, a former petroleum secretary, that first laid out the road map for deregulation of petrol and petroleum product prices over a decade ago, said a Business Standard report some days ago.

    The argument is based on the simple principle that an import-dependent nation like India cannot afford to encourage excessive consumption of energy based on unrealistically low prices.

    ===========================

    Butter Flutter

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  • 9 years ago

    In 2008 Government was in position to control price of petrol.

    But now Government has deregulated the petrol price. The price is determined by Oil marketing companies (of which Govt of India is majority share holder), who derive the price on the basis of demand and supply. But be sure if crude slips to even 50 dollar per barrel, the consumer is not going to get petrol at Rs 50 due to one reason or another, except when the elections are declared. As of now, blame to previous Governments and alike excuses are being offered to consumers as a consolation.

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  • 9 years ago

    I have been following budget announcements since 50 years. During Nehru's time, all policies of the government were in line with socialism and greater care used to be taken not to affect the masses. But that time, in every budget, there used to be increased taxation in different items to meet the financial needs of the developmental and non-developmental expenses of the government. Public was not expecting any relief measures in taxation. Then, first time in 1973, when Mr. Y. B. Chahan was the Finance Minister, petrol prices were hiked from 75 paise per liter to Rs. 3 per liter. That was the biggest shock. I was working in the Head Office of the Tata group company at Bombay House in Mumbai and a large number of my seniors stopped using cars or started pool system to economise on petrol expenses. After sometime they got adjusted to the higher price and everything was normal. But the biggest change that resulted was that the goverment realised the advantage of increasing the petrol price which they kept doing just 2 to 4 weeks before the budget followed by budget full of reliefs. Though the reliefs annonced used to be minor, like reduction in excise duty on pressure cookers or life-saving medicines, it was making the public happy. Since then, this method of increasing petrol prices before the budget became a routine matter.

    To answer your question, in 2008, petrol prices were controlled and the extra burden was being borne by the government. But now, Mr. Murli Deora was successful in convincing the government that it is better to free the petrol prices as the government can be spared of the extra burden. In fact, this idea was implemented during NDA rule by the then petroleum minister and has been revived.

    My forecast is that the control on petrol price will return once the government dilutes its holding in oil companies and public holding increases. Thereafter, petrol price control will be reimposed with some subsidy from the government like in the case of fertilizer companies.

    Eventually, the world will have to divert to other sources of power like nuclear, wind energy and solar energy to reduce dependence on the scarce oil resource.

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  • friend,

    Already scholar members have given excellent analytical answers.

    Those are very good reasons.

    But the Government as long as it does not try to reduce corruption and vote bank politics and the introduction of Vote bank schemes involving huge amounts , but the amounts nor percolating to the desired level , and wasted or diverted away by some Notorious brains in between, automatically the Public money is Wasted and the Treasure balance is reduced.To make good the balance to some extent it becomes imperative to govt. to hike petrol and diesel, cars costs etc .

    Let the Govt. try with Unbiased Mind bring back the amounts that are hidden in Swiss banks, there would be no need to Hike any price.

    So these Vote Bank politics and Schemes aimed at attracting the votes of certain classes , this hike goes on .

    Just For Example The governments of many states introduced Audio Visual education scheme and in all Mandals so many schools were supplied TVs and VCRs and some Educational Cassettes. But Today in NO SCHOOL THERE IS NONE OF THESE THINGS,NO TVs NO VCRs and NO CASSETTES…How many Crores of rupees were lost in vain and went in drain.

    Similarly Midday Meals Scheme in schools to increase attendance. Most schools are one teacher schools. Who brings the groceries, where to store, who cooks and serves and cleans the utensils.. nothing mentioned. all teachers stopped teaching and spent time worrying about the scheme. Now the scheme discontinued and contractors’ bills are pending. How many Crores of rupees were wasted without results.

    Similarly Rs 5000 for Every pregnant rural lady .What happened to this scheme? What happened to the released funds?

    What about reimbursement of fees to certain classes ?Every one knows the situation.

    Rs 2 kg Rice, Rs 3 Kg rice etc schemes failed utterly and Huge amounts of Public money siphoned away.

    Electricity schemes. Free agricultural land of 5 acres to landless….free books to Rural Students…..What happened to the amount granted and released.? No one Knows .

    There are such umpteen schemes , started and unfinished or discontinued .Sheer waste of Many Millions of thousands of rupees.

    initially there will be UPROAR , but as time passes , people get adjusted and all will be normal.

    That is the human tendency.

    I feel this too is the one of the main reason.

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  • 9 years ago

    It is sad that gents like Madhukar safely avoid touching sensitive info revealed by Activists like Pushpavanam. Earlier journalists like Mr Gurumoorthy also written about this drama played by successive govts! Since the petro company lobby is powerful even with opposition parties, whom the big industry keep in good humour, no question is raised on the drama being played in the name of ‘’losses’’ incurred by companies and ‘’subsidy burden’’ on the govt! Many countries sell petroleum products at much lower rate than in India where the centre and state govts tax it heavily and cheat people with dubious excuses!

    OPEC countries earned 3346 billion $ by export of crude oil in 2004-08 period and the G-7 countries that imported the crude earned 3418 billion $ through taxes on petro products in the same period! In other words, the importing countries raised more value than the export countries, from the taxes on petro products domestically!

    Govt says the levy of taxes is necessary to implement development plans. But do they really spend the proceeds for the intended development? During 1991-92 Central govt raised Rs 84337 crores from taxes for development of Oil Industries Board but released only 902 crores to the Board!

    During last year (2009-10), central and state govts collected a sum of Rs 183861 crores from excise and taxes. In the same year, the ONGC earned Rs 16767 crores, IOC Rs 10220 crores, HP 1301 crores, BP 1837 crores, Oil India 2610 crores as profits!!! The aggregate profit of the oil companies and corporation was Rs 32735 crores!!

    The hard truth is that no provision is made in the govt budgets towards subsidy for petroleum! But it is shown as being paid! ONGC chairman Mr RS Sharma announced that he had released Rs5515 crores as subsidy to oil companies for the April-June quarter, while the oil companies had earned a profit of Rs.3661 crores in this quarter! It turns out that the companies had sold petrol at less than the eligible (higher) rates during the quarter and the ‘difference’ between the eligible and actual profits is paid as subsidy!! Ha ha ha.. grin and bear it!!

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  • 9 years ago

    In UK the price of petrol went up by 20% in a year and 75% is tax

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  • 9 years ago

    Cos the treasory of indian governance has been very low due to CWG Scam, Adarsh Scam and the 2G scam by the reputed politicians. No money, no honey (no money for crude oil).

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  • 9 years ago

    I fully endorse the views and facts given by some of the experts herein as reply.

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  • 9 years ago

    Mismanagement of govt. as also its tendency to increase profits of corporates house, industralists, traders so that middle class stay where it is, poor gets poorer and rich gets richer. This suits the congress perfectly as in this way, its votebank as also money-making machinery remains intact.

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