Over the last few days, the retail prices of petrol and diesel have touched an all-time high. In Delhi, petrol was selling at 74.6/litre on April 25, 2018, while diesel was at 66/litre.
Petroleum products are used as raw materials in various sectors and industries such as transport and petrochemicals. These products may also be used in factories to operate machinery or generators. Any fluctuation in the price of petrol and diesel impacts the production and transport costs of various items. When compared to other neighbouring countries, India has the highest prices for petrol and diesel.
Note: Prices as on April 1, 2018. Prices for India pertain to Delhi.
Sources: Petroleum Planning and Analysis Cell, Ministry of Petroleum and Natural Gas; PRS.
How is the price of petrol and diesel fixed?
Historically, the price of petrol and diesel in India was regulated, i.e. the government was involved in the deciding the retail price. The government deregulated the pricing of petrol in 2010 and diesel in 2014. This allowed oil marketing companies to determine the price of these products, and revise them every fortnight.
Starting June 16, 2017, prices for petrol and diesel are revised on a daily basis. This was done to with the idea that daily revision will reduce the volatility in retail prices, and protect the consumer against sharp fluctuations. The break-up of retail prices of petrol and diesel in Delhi on April 25, 2018 can be found below. As seen in the table, over 50% of the retail price of petrol comprises central and states taxes and the dealer’s commission. In case of diesel, this amount is close to 40%.
Table 1: Break-up of petrol and diesel prices in Delhi (on April 25, 2018)
|
Component |
Petrol |
Diesel |
||
| Rs/litre | % of retail price | Rs/litre |
% of retail price |
|
| Price Charged to Dealers | 35.7 | 48% | 38.4 | 58% |
| Excise Duty (levied by centre) | 19.5 | 26% | 15.3 | 23% |
| Dealer Commission | 3.6 | 5% | 2.5 | 4% |
| VAT (levied by state) | 15.9 | 21% | 9.7 | 15% |
| Retail Price | 74.6 | 100% | 65.9 | 100% |
Does India produce enough petroleum to support domestic consumption?
India imports 84% of the petroleum products consumed in the country. This implies that any change in the global prices of crude oil has a significant impact on the domestic price of petroleum products. In 2000-01, net import of petroleum products constituted 75% of the total consumption in the country. This increased to 95% in 2016-17. The figure below shows the amount of petroleum products consumed in the country, and the share of imports.
Note: Production is the difference between the total consumption in the country and the net imports.
Sources: Petroleum Planning and Analysis Cell; PRS.
What has been the global trend in crude oil prices? How has this impacted prices in India?
Over the last five years, the global price of crude oil (Indian basket) has come down from USD 110 in January 2013 to USD 64 in March 2018, having touched a low of USD 28 in January 2016.
While there has been a 42% drop in the price of global crude over this five-period, the retail price of petrol in India has increased by 8%. During this period, the retail price of diesel increased by 33%. The two figures below show the trend in prices of global crude oil and retail price of petrol and diesel in India, over the last five years.
How has the excise duty on petrol and diesel changed over the last few years?
Under the Constitution, the central government has the powers to tax the production of petroleum products, while states have the power to tax their sale. Petroleum has been kept outside the purview of the Goods and Services Tax (GST), till the GST Council decides.
Over the years, the central government has used taxes to prevent sharp fluctuations in the retail price of diesel and petrol. In the past, when global crude oil prices have increased, duties have been cut. Since 2014, as global crude oil prices declined, excise duties have been increased.
Sources: Petroleum Planning and Analysis Cell; PRS.
As a consequence of the increase in duties, the central government’s revenue from excise on petrol and diesel increased annually at a rate of 46% between 2013-14 and 2016-17. During the same period, the total sales tax collections of states (from petrol and diesel) increased annually by 9%. The figure below shows the trend in overall collections of the central and state governments from petroleum (including receipts from taxes, royalties, and dividends).
Notes: Data includes tax collections (from cesses, royalties, customs duty, central excise duty, state sales tax, octroi, and entry tax, among others), dividends paid to the government, and profit on oil exploration.
Data sources: Petroleum and Planning Analysis Cell; Central Board of Excise and Customs; Indian Oil Corporation Limited; PRS.
The Uttarakhand Assembly concluded a two-day session on November 30, 2022. The session was scheduled to be held over five days. In this post we look at the legislative business that was carried out in the Assembly, and the state of state legislatures.
13 Bills were introduced and passed within two days
As per the Session Agenda, a total of 19 Bills were listed for introduction in the span of two days. 13 of these were listed to be discussed and passed on the second day. These included the Uttarakhand Protection of Freedom of Religion (Amendment) Bill, 2022, University of Petroleum and Energy Studies (Amendment), Bill, 2022, and the Uttarakhand Anti-Littering and Anti-Spitting (Amendment) Bill, 2022.
The Assembly had proposed to discuss and pass each Bill (barring two) within five minutes (see Figure 1). Two Bills were allocated 20 minutes each for discussion and passing - the Haridwar Universities Bill, 2022, and the Public Service (Horizontal Reservation for Women) Bill, 2022. As per news reports, the Assembly passed all 13 Bills within these two days (this excludes the Appropriation Bills). This raises the question on the amount of scrutiny that these Bills were subject to, and the quality of such laws when the legislature intends to pass them within mere minutes.
Figure 1: Excerpt of Uttarakhand Assembly's November 2022 Session Agenda
Law making requires deliberation, scrutiny
Our law-making institutions have several tools at their disposal to ensure that before a law is passed, it has been examined thoroughly on various aspects such as constitutionality, clarity, financial and technical capacity of the state to implement provisions, among others. The Ministry/Department piloting a Bill could share a draft of the Bill for public feedback (pre-legislative scrutiny). While Bills get introduced, members may raise issues on constitutionality of the proposed law. Once introduced, Bills could be sent to legislative committees for greater scrutiny. This allows legislators to deliberate upon individual provisions in depth, understand if there may be constitutional challenges or other issues with any provision. This also allows experts and affected stakeholders to weigh in on the provisions, highlight issues, and help strengthen the law.
However, when Bills are introduced and passed within mere minutes, it barely gives legislators the time to go through the provisions and mull over implications, issues, or ways to improve the law for affected parties. It also raises the question of what the intention of the legislature is when passing laws in a hurry without any discussion. Often, such poorly thought laws are also challenged in Courts.
For instance, the Uttarakhand Assembly passed the Uttarakhand Freedom of Religion (Amendment) Bill, 2022 in this session (five minutes had been allocated for the discussion and passing of the Bill). The 2022 Bill amends the 2018 Act which prohibits forceful religious conversions, and provides that conversion through allurement or marriage will be unlawful. The Bill has provisions such as requiring an additional notice to be sent to the District Magistrate (DM) for a conversion, and that reconversion to one’s immediate previous religion will not be considered a conversion. Some of these provisions seem similar to other laws that were passed by states and have been struck down by or have been challenged in Courts. For example, the Madhya Pradesh High Court while examining the Madhya Pradesh Freedom of Religion Act, 2021 noted that providing a notice to the DM for a conversion of religion violates the right to privacy as the right includes the right to remain silent. It extends that understanding to the right to decide on one’s faith. The Himachal Pradesh Freedom of Religion Act, 2006 exempted people who reconvert to their original religion from giving a public notice of such conversion. The Himachal Pradesh High Court had struck down this provision as discriminatory and violative of the right to equality. The Court also noted that the right to change one’s belief cannot be taken away for maintaining public order.
Uttarakhand MLAs may not have had an opportunity to think about how issues flagged by Courts may be addressed in a law that regulates religious conversions.
Most other state Assemblies also pass Bills without adequate scrutiny
In 2021 44% states passed Bills on the day it was introduced or on the next day. Between January 2018 and September 2022, the Gujarat Assembly introduced 92 Bills (excluding Appropriation Bills). 91 of these were passed in the same day as their introduction. In the 2022 Monsoon Session, the Goa Assembly passed 28 Bills in the span of two days. This is in addition to discussion and voting on budgetary allocation to various government departments.
Figure 2: Time taken by state legislatures to pass Bills in 2021
Note: The chart above does not include Arunachal Pradesh and Sikkim. A Bill is considered passed within a day if it was passed on the day of introduction or on the next day. For states with bicameral legislatures, bills have to be passed in both Houses. This has been taken into account in the above chart for five states having Legislative Councils, except Bihar (information was not available for Council).
Sources: Assembly websites, E-Gazette of various states and Right to Information requests; PRS.
Occasionally, the time actually spent deliberating upon a Bill is lesser than the allocated time. This may be due to disruptions in the House. The Himachal Pradesh Assembly provides data on the time actually spent discussing Bills. For example, in the August 2022 Session, it spent an average of 12 minutes to discuss and pass 10 Bills. However, the Uttarakhand Assembly allocated only five minutes to discuss each Bill in its November 2022 Session. This indicates the lack of intent of certain state legislatures to improve their functioning.
In the case of Parliament, a significant portion of scrutiny is also carried out by the Department Related Standing Committees, even when Parliament is not in session. In the 14th Lok Sabha (LS), 60% of the Bills introduced were sent to Committees for detailed examination, and in the 15th LS, 71% were sent. These figures have reduced recently – in the 16th LS 27% of the Bills were sent to Committees, and so far in the 17th LS, 13% have been sent. However, across states, sending Bills to Committees for detailed examination is often the exception than the norm. In 2021, less than 10% of the Bills were sent to Committees. None of the Bills passed by the Uttarakhand Assembly had been examined by a committee. States that are an exception here include Kerala which has 14 subject Committees, and Bills are regularly sent to these for examination. However, these Committees are headed by their respective Ministers, which reduces the scope of independent scrutiny that may be undertaken.
