Every time you fill up your car’s tank, do you feel a pinch in your wallet? You’re not alone. While global crude oil prices have dropped by 25% in the last decade, petrol prices in India have soared by 30%. Shockingly, Indians pay ₹21 more per litre of petrol than Americans.
Why does this happen? The answer lies in taxation, currency fluctuations, and government policies. Let’s break down why fuel in India will likely never be cheap.
1. Heavy Taxes: The Biggest Culprit
Unlike many countries where fuel prices are determined mostly by crude oil costs, Indian fuel prices are dominated by taxes.
Central Excise Duty + State VAT = ₹12–15 per litre on petrol, ₹6–12 on diesel
Additional cess and surcharges further inflate prices
For example, if the base price of petrol is ₹40, taxes can push it beyond ₹100 in cities like Mumbai.
Comparison with Other Countries:
USA: Low federal taxes → Petrol costs around ₹80/litre (equivalent)
UK: High taxes but better public transport alternatives
India: High taxes without proportional infrastructure benefits
2. Rupee vs. Dollar: The Exchange Rate Effect
India imports over 85% of its crude oil, paying in US dollars. When the rupee weakens, oil becomes costlier.
2014: 1 USD = ₹60
2024: 1 USD = ₹83
Even if global crude prices drop, a weaker rupee offsets the benefit for Indian consumers.
India imports over 85% of its crude oil, paying in US dollars. When the rupee weakens, oil becomes costlier.
2014: 1 USD = ₹60
2024: 1 USD = ₹83
Even if global crude prices drop, a weaker rupee offsets the benefit for Indian consumers.
3. Government Revenue Dependency
Fuel taxes contribute heavily to government revenue:
₹5 lakh crore+ collected annually from petrol & diesel taxes
Used for infrastructure, subsidies, and welfare schemes
Since reducing taxes would mean lower revenue, governments (central & state) are reluctant to cut them.
Fuel taxes contribute heavily to government revenue:
₹5 lakh crore+ collected annually from petrol & diesel taxes
Used for infrastructure, subsidies, and welfare schemes
Since reducing taxes would mean lower revenue, governments (central & state) are reluctant to cut them.
4. Subsidies & Political Factors
Subsidies on LPG and kerosene shift the burden to petrol & diesel users.
Election years sometimes see temporary price cuts, but taxes rise again later.
Subsidies on LPG and kerosene shift the burden to petrol & diesel users.
Election years sometimes see temporary price cuts, but taxes rise again later.
5. Will Fuel Prices Ever Drop Significantly?
Unlikely, unless:
✔ Taxes are reduced (politically difficult)
✔ Rupee strengthens against the dollar
✔ Alternative energy (EVs, biofuels) reduces oil dependency
Unlikely, unless:
✔ Taxes are reduced (politically difficult)
✔ Rupee strengthens against the dollar
✔ Alternative energy (EVs, biofuels) reduces oil dependency
Conclusion: The Bitter Truth
Fuel in India is expensive not because of crude oil prices but due to high taxes, rupee depreciation, and government revenue needs. Unless policies change, cheap fuel remains a distant dream for Indian consumers.
Fuel in India is expensive not because of crude oil prices but due to high taxes, rupee depreciation, and government revenue needs. Unless policies change, cheap fuel remains a distant dream for Indian consumers.
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