<h5>What are petrol, diesel, and crude oil?</h5>  <p>Natural resources such as crude oil, coal, stones, etc. are spread across the world in different countries. Crude oil is a dense, black liquid that is dug out from ocean beds. It is processed in large oil refineries to make fuels such as petrol and diesel. 
These fuels run automobiles, generators, and even large machines in factories. Crude oil is also used as a raw material to make many other products that we use daily such as crayons, ink, creams, makeup, and even shampoo.</p> <h5>Who decides the prices we pay at petrol pumps?</h5>  <p>There are numerous components which together decide the price of petrol. These are:
1. Price charged to oil marketing companies (OMCs): This is the price at which OMCs such as Indian Oil, Bharat Petroleum, etc. purchase crude oil from oil refineries. </p>
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<p>2. Prices charged to dealers: This is the cost that dealers pay for the fuel. Dealers are people who are in the business of buying petrol and diesel from OMCs and selling it to us.
The price of fuel increases at both these levels for OMCs and their dealers to make profits. However, there are additional charges which must be paid to the government before fuel can be sold to us. These are:</p>
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3. Excise duty: This is a form of tax collected by the central government. </p>
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4. Value-added tax (VAT): This is a form of tax collected by the state government. </p>
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The total of all the above components together decides the price we pay as consumers. </p> <h5>Why were petrol and diesel prices in the news?</h5>  <p>Petrol and diesel prices are currently at an all-time high. This is happening even though OMCs are buying oil from refineries at very low prices.
What is even more problematic is that petrol and diesel prices are continuing to rise. Between May 2021 and July 2021, the prices of petrol and diesel increased 24 times. Over 50% of the total price of petrol and diesel was excise duty and VAT only.</p> <h5>What are the implications of high petrol and diesel prices?</h5>  <p>Petrol and diesel prices affect almost all aspects of life. All essential commodities such as soap, medicines, vegetables, fruits, etc. are transported in vehicles that run on these fuels. If the prices of these fuels rise, the transportation cost of essentials will also rise. People who own vehicles will have to spend on fuel and there is a high chance that the cost of public transportation such as buses, auto, etc. may also rise.</p> <h5>Why is the central government not decreasing its tax?</h5>  <p>Mr. Dharmendra Pradhan, the Union Minister for Petroleum and Natural Gas and Steel, recently stated that he was aware that fuel prices were problematic. However, these prices could not be brought down.
He explained that an enormous amount of money was spent on free COVID-19 vaccinations and free food grains during the lockdown, and still more money was needed to fund welfare schemes. In order to fund these welfare schemes, the government needs to use extra money from the tax on fuel prices. Therefore, the tax on petrol and diesel is so high.</p>

The price of fuels such as petrol and diesel has been increasing almost every week. Let's find out who decides how much fuel costs and the reason for the price increase.

Who Decides the Price of Petrol and Diesel?

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Who Decides the Price of Petrol and Diesel?

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