Fuel prices in India were increased on Thursday after holding on for a day. As per state-owned oil marketer Indian Oil's website, petrol per litre was hiked close to 20 paise across metro cities to Rs 79.51 in Delhi, Rs 82.41 in Kolkata, Rs 86.91 in Mumbai and Rs 82.62 in Chennai. Similarly, diesel prices per litre have been raised to Rs 71.55 in Delhi, Rs 74.40 in Kolkata, Rs 75.96 in Mumbai and Rs 75.61 in Chennai.
The rates mark fresh all-time highs in all these cities. These rates are decided based on crude oil rates prevailing in the global markets and taxes imposed by the state and central government. According to Reuters data, global crude benchmark Brent declined on Wednesday after hitting $79.72 a barrel on Tuesday- its highest since May.
On Thursday, the fall continued as weakness in emerging markets have been weighing on investor sentiments. Currencies of many emerging economies including Turkey, India, South Africa, and Indonesia have fallen this week. The rupee marked its new all-time high of 71.96 against the dollar.
This has raised concerns of slowing down demand for oil in these countries, especially China (which has already reduced its oil imports). The prospects fall in demand and increased supply from OPEC (Organisation of Petroleum Exporting Countries) have been the causes of the recent downfall. Brent crude price today, however, still lingers closer to $80 at $77.22 a barrel.
In India, on the other hand, the falling rupee has weighed on the import costs of the oil importing companies and they pass on the burden to consumers. The state, as well as the centre, refuse to reduce the taxes they impose on the two petroleum products as it forms a major source of revenue for the governments.
Additionally, at a time where the rupee is its weakest, the government cannot afford to lose any income from oil to maintain economic stability. Many of the infrastructural projects taken up by the Union government are being funded by these taxes. In states like Karnataka, the burden of farm loan waivers was passed on to petroleum VAT imposed on consumers in the state.