Despite Fall In Global Prices, Govt Won’t Reduce Petrol, Diesel Price: Find Out Why?


Most state governments will not be cutting value-added tax (VAT) and sales tax levied on fuel.

Fuel prices did not go down since global crude oil rates saw a marginal hike.

Benchmark Brent crude oil remains below $70 per barrel.

Situation About To Worsen

Prices could, in fact, increase soon since major oil suppliers will likely not increase supply as they fear weaker global demand.

This is unwelcome news for India since domestic prices are at an all time high and will not change anytime soon if global crude oil prices remain at current levels.

Given that the government also does not intend to cut excise duty levied on petrol and diesel, domestic fuel prices will not go down anytime soon.

Finance Minister Nirmala Sitharaman blamed the previous UPA government for the current situation and said that the incumbent administration will “not be able to reduce high excise duty on fuel.”

What Are The Allegations Against UPA?

Congress-led UPA government sold petrol, diesel, cooking gas and kerosene at subsidised rates during its reign.

The then government did not compensate for the subsidies.

if it had paid for the subsidy, it would have led to parity between the artificially reduced retail selling price and the increased cost which came about due to international rates crossing $100 per barrel.

Instead of doing so, it issued oil bonds totalling Rs 1.34 lakh crore to the state-fuel retailers.

Now the present government is paying oil bonds and the interest thereon.

Quantity To Be Paid And The Timeframe

Sithamaran said that if her government did not have the obligation to service the bonds, they would have had the power to reduce v\excise duty on fuel.”

The amount paid so far in the last 7 years is Rs 70,195.72 crore, out of the total of Rs 1.34 lakh crore.

The figure comprises Rs 3,500 crore of principal.

The total figure must be paid between this fiscal and 2025-26.

The Breakdown

The government has to repay Rs 10,000 crore this fiscal year (2021-22).

Another Rs 31,150 crore is due to be repaid in 2023-24.

Rs 52,860.17 crore must be paid in the year after and finally Rs 36,913 crore in 2025-26.

States Can’t Help Either

She added that before any decision is taken there needs to be detailed discussion between states and the Centre.

Most state governments will not be cutting value-added tax (VAT) and sales tax levied on fuel.

In such a situation, relief for the public can come only if state-run oil marketing companies (OMCs) take the initiative to cut rates according to daily revision.

What The Public Can Hope For

But the chances of this happening is also low due to the volatility in the international oil market.


Thereby, the only relief one can hope for is that the rates do not get any higher, since a reduction seems off the table at the moment from the powers that be.

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