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Current Affairs

Petrol and diesel prices continues to rise

Date: 11 June 2021 Tags: Basics of Economics

Issue

The government has blamed the global surge in prices of crude oil for the rise of petrol and diesel prices in India.

 

Background

Six Indian states have witnessed the prices soar above Rs 100 per litre for petrol. The prices have risen by more than Rs 4 since May.

 

Details

  • The economic recovery after the pandemic has pushed the prices of crude oil in the market. From the beginning of this year, crude oil has risen by 37 percent.

  • The prices are however higher than the average prices when crude oil prices were more than $100 per barrel.

 

Main reason for rise

  • The major reason for prices of petrol and diesel to rise is the taxes imposed on the commodity.

  • In many states, the central and state taxes make up more than 50 percent of the price of petrol and diesel. This was because of hike in taxes imposed.

  • The government’s revenue sources have dried up and the increase in taxes is an effort to shore up revenue.

  • Many states have cut taxes on petrol and diesel but the central government is yet to cut taxes even though RBI has advised for it.

  • The government has said it has no plans to cut central taxes as the revenue earned is less. The increase in expenditure in health sector is termed another reason for the high rates.