What are the reasons for high fuel prices in India?

We will present to you the reasons why fuel prices are rising too high in India.

On 25th May 2021, state-run oil companies raised petrol price by 23 paise per litre and diesel by 25 paise. It was the 13th hike, making petrol costlier by Rs 3.04 a litre and diesel by 3.59 since May 4. Due to surging international oil rates, and exorbitant domestic tax structure prices of petrol and diesel in pumps are high. Now we will tell you the reasons why the fuel prices are rising rapidly.

Reasons for high fuel prices


  1. Global oil surged on demand optimism and a snag on the possibility of increasing the US sanction on Iranian crude supply. The American Petroleum Institute (API) released crude oil reserves data on 25th May 2021. As per API, there was a draw of 4.39 lakhs barrels of crude oil in the week that ended on May 21. This signifies there will be a purchase for the entire week. therefore, crude oil demand increased, and crude oil prices rapidly shot up. Just a day before that, while the price of diesel was increased by 25 paise per litre, the price of petrol was increased by 23 paise per litre.
  2. The Union Minister of petroleum and natural gas, Dharmendra Pradhan said on Wednesday, “There has been a jump in crude oil prices in the international market. One of the main reasons behind the rise in fuel prices in India is that we have to import 80% of the oil we consume.”
  3. He also launched an attack on former Prime Minister Manmohan Singh by stating that the previous government had left oil bonds worth crores for repayment. Oil bonds are long-term special securities issued by the government in place of a cash subsidy.
  4. He further says that the bonds are what the current government has to repay along with its interest, leading to an increase in petrol rates.
  5. Pradhan added, “Economists have raised a point that Congress had left oil bonds worth crores for repayment, due to which we’ve to now pay both its interest and its principal price, this is also a big reason for the rise in fuel prices.
  6. He also blamed the price of crude oil in the international market for the hike in fuel prices in India.
  7. The minister had earlier mentioned that it depends upon the GST  Council to decide whether the fuel should be brought under the Goods and Services Tax, which, may believe, would substantially bring down the prices.
  8. At present, the central and state taxes make up 60% of the retail selling price of petrol and over 54%  of diesel. Centre levies 32.90 rupees per litre of excise duty on petrol and 31.80 rupees a litre on diesel.
  9. BJP’s IT cell chief Amit Malviya had alleged that the increased prices of petrol and diesel are a legacy of UPA’s mismanagement.
  10. Amit Malviya said, “We are paying for the oil bonds that will come up for redemption…..issued by UPA to oil companies for not increasing retail prices then!” Congress leader Amitabh Dubey replied by saying that oil bonds cannot be the sole reason for the skyrocketing prices. He tweeted, “Indians consumed 30 million MT of petrol and 73 MMT of diesel, or 14,228 crores litres in 2019-20. A 20,000 crore rupees bond payment adds up to a drumroll of 1,40 rupees litre. Meanwhile, the Modi government has increased fuel prices by seven rupees litre in just last six weeks.”