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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.
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 results of General Election 2019 were declared last week concluding the process for electing the 17th Lok Sabha. Immediately after the results, the previous Lok Sabha was dissolved. The next couple of days will witness several key events such as swearing-in ceremony of the Prime Minister and Cabinet, and the first session of the 17th Lok Sabha. In the first session, the newly elected MPs will take their oaths, the Speaker of the 17th Lok Sabha will be elected, and the President will address a joint sitting of Parliament. In this blog, we explain the process and significance of the events that will follow in the days to come.
Key Events in the First Session of the 17th Lok Sabha
The Bharatiya Janta Party has emerged as the single largest party and the leader of the party will be sworn-in as the Prime Minister. As per Article 75(1) of the Constitution, the other ministers are appointed by the President on the advice of the Prime Minister. The 91st Amendment to the Constitution limits the total size of the Council of Ministers to 15% of the total strength of the House (i.e., 81 Ministers). As per media reports, swearing-in of the Council of Ministers is scheduled for May 30, 2019.
How is the schedule for first session decided?
The 17th Lok Sabha will commence its first session in the first week of June. The exact date of commencement of the first session and the schedule of key events in the session, including the date of President’s address, is decided by the Cabinet Committee on Parliamentary Affairs. This Committee will be set up after the swearing in of the Council of Ministers. The previous Lok Sabha had commenced on June 4, 2014 and its first session had six sitting days (June 4, 2014 to June 11, 2014).
Who presides over the first session?
Every proceeding of the House is presided by a Speaker. The Office of the Speaker becomes vacant immediately before the first meeting of a new Lok Sabha. Therefore, a temporary speaker, known as the pro-tem Speaker, is chosen from among the newly elected MPs. The pro-tem Speaker administers oath/affirmation to the newly elected members, and also presides over the sitting in which the new Speaker is elected. The office of the pro-tem Speaker ceases to exist when the new Speaker is elected.
How is the pro-tem speaker chosen?
Once the new government is elected, a list containing the names of the senior-most members of the House is prepared. The seniority is decided by total tenure as a member of either Lok Sabha or Rajya Sabha. The Prime Minister then identifies a Member from the list who acts as the Speaker pro-tem. Three other members are also identified before whom other members may take oath/affirmation.
How is the new Speaker chosen?
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Any member may give notice of a motion that another Member be chosen as the Speaker of the House. The motions are then moved and voted upon. After the results are announced, the Speaker-elect is felicitated by leaders of all political parties, including the Prime Minister and Leader of the Opposition. From then, the new Speaker takes over the proceedings of the House. |
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An understanding of the Constitution, the Rules of Procedure, and conventions of Parliament is considered a major asset for the Speaker. While this might indicate that a Speaker be one of the senior-most members of the House, this has not always been the norm. There have been occasions in the past where the Speaker of the House was a first-time MP. For instance, Mr. K.S. Hegde, the Speaker of the sixth Lok Sabha and Mr. Bal Ram Jakhar, the Speaker of the seventh Lok Sabha were both first time MPs |
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What is the role of the Speaker in the House?
The Speaker is central to the functioning of the legislature. The proceedings of the House are guided by the Rules of Procedure and the final authority for the interpretation and implementation of these rules rests with the Speaker. The Speaker is responsible for regulating the discussion in the House and maintaining order in the House. For instance, it is the Speaker’s discretion on whether to allow a member to raise a matter of public importance in the House. The Speaker can suspend a sitting member for obstructing the business of the House, or adjourn the House in case of major disorder.
The Speaker is also the chair of the Business Advisory Committee, which is responsible for deciding the business of the House and allocating time for the same. The Speaker also chairs the General Purposes Committee and the Rules Committee of the Lok Sabha and appoints the chairpersons of other committees amongst the members. In the past, Speakers have also been instrumental in strengthening the Committee system. Mr. Shivraj Patil, the Speaker of the 10th Lok Sabha, played a key role in the initiation of 17 Departmental Standing Committees, therefore strengthening Parliament’s control over the functioning of different ministries of the government.
Since the Speaker represents the entire House, the office of the Speaker is vested with impartiality and independence. The Constitution and the Rules of Procedure have prescribed guidelines for the Speaker’s office to ensure such impartiality and independence. Dr. N. Sanjiva Reddy, the Speaker of the fourth Lok Sabha, formally resigned from his political party as he was of the opinion that the Speaker belongs to the whole House and should therefore remain impartial. As per Article 100 of the Constitution, the Speaker does not exercise vote on any matter being voted upon, in the first instance. However, in case there’s a tie during the voting, the Speaker exercises her vote.
What does the President’s Address entail?
The election of the Speaker is followed by the President’s Address. Article 87 of the Constitution requires the President to address both Houses at the beginning of the first session after each general election. The President also addresses both the Houses at the beginning of the first session of each year. The President’s address highlights the initiatives of the government from the previous year, and mentions the policy priorities for the upcoming year. After the address, the ruling party moves a Motion of Thanks to the President’s address in both Houses of Parliament. In the Motion of Thanks, MPs may move amendments to the motion, which are then put to vote.
The President of India, Mr. Ram Nath Kovind will address Parliament in this first session of the 17th Lok Sabha. During the 16th Lok Sabha, the first President’s address was held on June 9, 2014 and the last time he addressed Parliament was on January 31, 2019 (highlights of this address can be read here).
Sources: The Constitution of India; Rules and Procedure and Conduct of Business in Lok Sabha; Handbook on the Working of Ministry of Parliamentary Affairs; The website of Parliament of India, Lok Sabha; The website of Office of the Speaker, Lok Sabha.
