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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.

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%
Source: Price Build-up of Petrol and Diesel at Delhi effective April 25, 2018; Indian Oil Corporation Limited.

 

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.

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.

Petrol price

Diesel price

 

Note: Subsidy indicated in the graphs is notional.  While calculating the subsidy amount, other factors such as cost of domestic inputs will also have to be accounted.  Global Crude Oil Price is for the Indian basket.  Figures reflect average monthly retail price of petrol and diesel in Delhi.
Sources: Petroleum Planning and Analysis Cell; Indian Oil Corporation Limited; PRS.

 

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.

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.

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.

On March 22, Bihar registered its first two cases of the new coronavirus disease (COVID-19), one of whom died the same day.  Since then, the number of cases has increased steadily. As of April 19, Bihar has 86 confirmed cases of COVID-19, of which 47 are active cases and 37 have recovered.  33 new cases have been registered since last week. One more death has been registered since March 22.

Given the highly contagious nature of the disease, on March 22, the Government of Bihar announced a state-wide lockdown till March 31.  This was followed by a nation-wide lockdown enforced by the central government between March 25 and April 14, now extended up to May 3.  During the lockdown, severe restrictions have been placed on the movement of individuals. Establishments have remained closed, except those providing essential goods and services.  Restrictions are likely to be relaxed in less-affected districts post-April 20.

In this blog, we look at key measures taken by the state government in response to COVID-19 so far.

Early-stage: screening of travellers, awareness on precautionary measures

The initial responses from the state government were aimed towards: (i) raising awareness about precautionary measures to be taken against the disease, and (ii) screening of international travellers.  In this context, on February 25, the Bihar State Health Society issued advisories for: (i) measures to be taken in schools and colleges, and (ii) reporting of airline passengers and tourists with symptomatic cases to the district health administration.  On March 11, 104 Call Centre was designated as the COVID-19 control room, to address public queries related to the disease.

Prior to lockdown: limiting mass gatherings, mobilisation of the public health system

Limiting mass gatherings

Between March 13 and March 18, the state government issued orders to shut down various premises until March 31. These include Anganwadi centres, educational institutions, and commercial establishments such as cinema halls, parks, and shopping malls. The government staff was directed to come to office on alternate days. Gathering of more than 50 persons at one place was prohibited including any mass family gathering (except marriages).  The transport department was asked to restrict both public and private transport.

Healthcare measures

Welfare measures

  • On March 16, the Chief Minister announced that treatment costs for COVID-19 for residents of Bihar will be sponsored from the Chief Minister Medical Assistance Fund.  Moreover, the state government will provide assistance of four lakh rupees to the family of a person dying due to COVID-19.

  • The government issued directions to provide direct cash transfer in place of the food provided under the Mid-Day Meal scheme in schools, and at Anganwadi centres.

Essential goods and services

On March 21, the Food and Consumer Protection Department directed the district administration to ensure implementation of the Bihar Essential Article (Display of Prices and Stocks) Order, 1977.  The Order requires sellers of specified items to display stock and price for the public’s reference.  The specified items include food items, edible oilseeds, and petroleum products.  The Department also directed the district administration to send proposals for adding any new items to the list of specified items.

During lockdown: strengthening medical response, welfare measures

Upon announcement of the lockdown on March 22, state-level and district-level coordination committees were set up.  During the lockdown, the state government’s measures have been aimed towards: (i) strengthening the medical response in the state, (ii) providing relief to various sections of society from issues being faced during the lockdown, and (iii) addressing difficulties with the supply of essential goods and services.

Healthcare measures

  • On March 25, the Health Department constituted the Bihar COVID-19 Emergency Response Team which is responsible for the control and coordination of all health-related response.

  • Protocols for containment and treatment: Directions have been issued to implement several guidelines related to containment and treatment measures.  These include: (i) set up and operationalization of isolation centres and quarantine centres, (ii) containment plan to address local transmission and community transmission through cluster containment strategy, (iii) surveillance program for Influenza-like Illness (ILI) and Severe Acute Respiratory Illness (SARI), (iv) handling of waste generated during treatment/diagnosis/quarantine, and (v) sanitation of residence and nearby areas of a COVID-19 positive person.

  • Door-to-door screening campaign: On April 14, the Chief Minister issued directions to start door-to-door screening campaign for suspected cases in affected districts including Siwan, Begusarai, and Nalanda.  Such screening campaign will also be run in districts in border-areas, and an area within 3 km radius of the residence of COVID-19 positive patients.

  • Increasing manpower: The government invited medical professionals including doctors, nurses, and paramedics to volunteer.  It also directed the district administration to engage retired doctors, nurses, and paramedics from defence services for volunteer work.  Leaves of all employees of the Health Department were cancelled until April 30.  The Health Department deputed AYUSH practitioners to assist at isolation and quarantine centres.

  • Dedicated infrastructure for COVID-19: On April 5, certain government hospitals were designated as exclusive hospitals for treatment of COVID-19 patients.  The Health Department also directed certain big private hospitals in Patna to stop OPD services.

  • Other health-related measures: On March 23, the state government announced payment of one-month basic salary as an incentive to all doctors and health workers.  On April 13, the Health Department issued an order prohibiting spitting in public places by tobacco, cigarette, and Pan users.  Further, the state government announced that it will procure test kits from the private sector.

Welfare measures

  • Relief package: On March 23, the state government announced a relief package for people affected due to lockdown.  Key features of the relief package are: 

  1. ration of one-month to all ration cardholders for free,

  2. one-time cash transfer of Rs 1,000 per family to ration cardholders,

  3. payment of pensions for three months in advance to all pensioners including pension for old age persons, widows, and physically challenged, and

  4. release of pending scholarships to all students.

  • Help for migrants: On March 26, Rs 100 crore was allocated from the Chief Minister Relief Fund to provide aid to the migrants from Bihar stuck in other parts of the country due to the lockdown.  On April 2, the state government announced that a one-time cash transfer of Rs 1,000 will be provided to the migrants.  On April 13, an additional Rs 50 crore was allocated from the Relief Fund for this purpose.  State-wise nodal officers have been appointed for coordination of relief efforts for migrants.  The state government is running 10 food centres in Delhi to help migrants from Bihar.

  • Relief camps: On March 28, the state government decided to start relief camps along the border (including Nepal border) offering food, shelter, and medical help to persons coming in the state.  Community kitchens and relief camps have been started in government school campuses to provide food and shelter. 

  • Electricity tariff:  On April 8, the State Cabinet approved the proposals for: (i) reducing electricity tariff for domestic and agricultural consumers by 10 paise per unit and (ii) waiving the monthly meter fee.

Measures for businesses and agricultural activities

  • The state government provided certain relaxations to businesses in matters related to taxation.  These include:

  1. extension in the deadline for payment of GST from March 31 to June 30, no interest or penalty charges to be levied for late payment in certain cases,

  2. three-month extension in the deadline for one-time settlement scheme for pre-GST tax disputes, and

  3. cancellation of orders regarding attachment of bank accounts of certain tax defaulters.

  • On April 16, the Chief Minister issued directions to start procurement of wheat through the Primary Agriculture Credit Society (PACS).

Essential goods and services

Other Measures

Education:  On April 8, the cabinet approved the proposal to promote students of Class I to XI (except class X) without annual examination.

Legislature:  Salaries of MLAs and MLCs have been reduced by 15% for one year.  The amount will be donated to the state’s Corona relief fund.

Labour and employment:  On April 16, the Chief Minister issued directions to resume public works under the Saat Nischay Programme, Jal Jeevan Hariyali Yojana, and MNREGA.

For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.