 Last year around this time if you had gone to your local petrol pump in Delhi you would have paid about 72 odd rupees for petrol per liter of petrol and if you are in Mumbai where petrol has always been more expensive you would have paid about 77 and a half odd rupees around this time the middle of February. Right now petrol prices as you know in Delhi is just a shade below in 90 rupees and in Mumbai it's almost 96 rupees a liter so prices have gone up between 23 to 24 percent in the space of one year. Now normally you would be told that this is because crude prices have gone up crude oil from which petrol is made those prices have gone up in this one year so obviously you'll have to pay more but this is not true. The only reason you and I are paying more right now is because government taxes have gone up both central and state government taxes have gone up in the past one year and that is why we are paying more at a time we should actually be have been paying less because our earnings have gone down many people have lost their jobs many people have taken pay cuts so ideally they wish you got a little bit of a relief on petrol prices but no we are paying more in the middle of a recession why is that happening keep watching the show to understand. How is petrol made? Crude oil which can't be used directly is picked taken out of the earth's surface and then it is transported to refineries but it is refined and converted into different kinds of fuel so there's petrol which is very efficient as we know then there's diesel then there are things like aviation turbine fuel used in jet planes there is kerosene there's liquefied petroleum gas LPG which comes out there is Vaseline or white petroleum jelly which we use and it's also used in all kinds of cosmetics there are various kinds of products which come out of petrol and many of these products are then taken and suck through chemical processes converted into other products in fact all the plastics that you see around you right all the bottles from which you drink maybe your computers the computer frame everything somewhere or the other it's got something some amount of crude in it the car not just the petrol that's going into your car or the diesel that's going into your car many times the rubber in the wheels is actually crude oil based some of it could be crude oil based the paints on your water that also comes from crude so when crude prices go up all these things tend to become more expensive and obviously something like petrol which is hundred percent coming out of crude is going to get more expensive but here's the interesting thing that is worth looking at prices of petrol and diesel that we're paying have gone up by 25 to 23 25 28 percent depending on which city you're in but if you look at the price of crude that is being bought comparing the same period February to February now it has actually gone down marginally by 0.3 percent but it has still gone down now the reason I'm saying that is and I'm not comparing some random crude that is not used in India I am looking at crude that Indian refineries buy which together is called the Indian basket of crude and that basket of crude has actually more or less remain constant in fact as I said it's gone down for about $54.80 to a barrel to $54.63 to a barrel that's that's the change we've seen very marginal change but still there's been a change now despite that why are we paying more right we're paying more because of a simple reason that in the COVID period the government both the center and various states have increased the tax that they charge us the center has increased taxes by 13 rupees right it used to charge approximately 19 rupees to per liter of petrol and it's an amazing amount of tax already that has gone up to almost 33 rupees to a liter when we take when we take petrol and that alone is 37 percent of the total cost of petrol at a pump in Delhi 37 percent of the total cost of petrol in a pump in Delhi is just central government tax and in Delhi that which is levied by the Delhi government is about 20 rupees 60% 20 and a half rupees or so and that is 23% so together these two account for 70% of what you and I pay at our petrol pump in Delhi 70% now again what is the government saying the government is saying look there is no other way for us to raise money because things are selling you know GST has gone down people have lost jobs their income has gone down we've given big rebates to corporates we've given we've let them take big rebates on corporate taxes we've given concessions there so corporate tax recoveries are down the only place we have is petroleum products and therefore what can we do and you'll see that excise duty in the last year has actually gone up in the last year as we saw in the budget excise duty collections have gone up in a year when the economy has tanked so you can understand how much of that is only because more money is being taken from the consumer on the petrol and diesel they're using now another thing that the government likes to say is that well you know okay maybe we are together charging about 60% of the total retail prices taxes central and state taxes but look at the UK in the UK it is 63 4% so what's the big deal you go to Italy it is 65% there there are all these countries also charge a huge amount of tax on the petrol and diesel that people buy but again let me just compare in UK you pay about I'm going to convert it into rupee today in UK around this time you're essentially paying about 123 rupees for a liter of petrol right if you use rupee you would have to pay 123 rupees in UK today in Delhi you're paying 89 rupees okay now so obviously UK is people are paying more but compare it to the per capita income compare it to the per capita income and let's just take the 2020 IMF projections for per capita income UK per capita income is more than $39,000 per year and in India per capita income is $1,877 that's differential right okay people say that that is in dollar terms that doesn't make sense because obviously things are cheaper here with $33,000 $39,000 you'd be able to pay by many more things than you would be able to buy in the UK so let's take what is called purchasing power parity dollars which means that how much can one dollar buy in the UK versus how much can one dollar buy in India right and let's look at that and if we compare that then per capita income using purchasing power parity terms in the UK is about $44,300 in India it is $6,284 now if we compare that just PPP terms then an Indian consumer is paying five times more five times more when we adjust for that for the petrol they're buying even though in UK petrol is more expensive almost 50% more expensive but when we compare to our average income we are paying five times more than the UK consumer is right and this is in purchasing power parity terms if I just use dollar actual dollar terms right then the UK Indian consumer is paying 15 times more in nominal terms in actual dollar terms 15 times more than the UK consumer compared to their income again let me explain it to you again I'm not saying that they're paying more in real terms I'm saying compared to the income because ultimately what you pay should be compared to your income your ability to pay so that is one key reason the government should have given a rebate in this year and not taken more in taxes on fuel this is a year when people are already facing problems even those who are relatively affluent they're facing problems their income has gone down their many have lost job their jobs that businesses aren't doing well so this is a time when the government needed to give some kind of a relief to these people on certain costs like conveyance now a lot of the cost is actually look at diesel diesel prices have gone up as well pretty sharply in in the last one year if I compare diesel prices then they have gone up by 23% in Delhi and 28% in Mumbai so compare these two diesel is used not just by the rich not just by the affluent it is used for transporting goods it's used by farmers there had should have been some kind of a rebate here but this is only one part of the story because the second part of the story is petrol refineries are actually get some kind of a protection their prices are more or less protected I'll explain it to you briefly you see it doesn't matter what the cost is of producing petrol in India it simply doesn't matter how much it costs whatever the cost would be to import petrol that is more or less what refineries get they get 80% of what they get what they get as refinery gate price right nowadays since it's unregulated is just what it would cost to import petrol and by the way it's just not the cost of importing petrol it is the cost of buying petrol at a let's say at a port in the Gulf putting it on a ship the cost of port charges then transporting it in the ship the petrol insurance cost of the ship and then port handling charges freight everything is put together and a trade parity prices put together there mind you not none of this has happened none of this has happened the petrol has not been imported it has not been no insurance has been paid there's been no freight cost everything has been produced in India yet there's this protection that refineries get this refinery protection which ensures that they will always get a margin whatever the price of crude might be the higher the price of crude the more expensive it is abroad to produce petrol the more the margin is that is how they gain because their cost of producing petrol is lower in India so we are affected through this double whammy one is this fixed or protected price that petroleum refineries get and the second is the high taxes that the government takes that's the reason we pay so much for petrol