Explained: Reason behind hike of petrol, diesel prices after a 137-day freeze

New Delhi: In the latest development, oil marketing companies (OMCs) increased the price of petrol and diesel in India on Tuesday. Both fuels were hiked by 80 paise a litre each. In New Delhi, petrol is being sold at Rs 96.21 per litre while diesel is priced at Rs 87.47 per litre.

Notably, the jump in fuel prices comes after a freeze of 137 days. This raises a question to our mind — why have oil marketing companies hiked fuel prices?

Before we explain to you the reason behind the hike in petrol and diesel prices, we must tell you that domestic cooking gas (LPG) prices raised by Rs 50 per cylinder.

Why oil marketing companies hiked fuel price now

In November 2021, oil marketing companies have announced the jump in prices of petrol and diesel.  The new hike has been implemented in the backdrop of a sharp increase in the price of crude oil.

India is a majorly dependent country on imports to fulfil its need for fuels. India imports about 85% of its fuel requirements from the international market.

It is reported that the price of brent crude has shot up by 45 per cent to $118.45 per barrel from $81.6 per barrel. Companies increased the rate last when the price was at $81.6 per barrel.

On November 4, the centre gave relaxation in prices by dropping excise duty on petrol and diesel. Petrol had registered a Rs 5 per litre cut in excise duty and a Rs 10 per litre cut in excise duty on diesel.

It is also said that the government decided not to raise the prices owing to the elections in four states, Uttar Pradesh, Punjab, Uttarakhand, Goa and Manipur.

What determines fule rates in India?

The retail price of fuels is revised by OMCs as per the international market. Besides, factors like exchange rate, tax structure, inland freight also affect the price.

Moreover, we also pay Rs 32.9 per litre tax to the Centre and value-added tax as decided by states.