There is a rule that is taught in economics classes on all times. Now and then it continues without change. When the demand for a commodity increases and the supply decreases, the price increases. At the same time, if availability increases and demand does not increase accordingly, prices will fall. But this principle has never been true in the case of fuel prices in India. Crude oil prices fell as international / global demand for petrol / diesel declined and availability remained the same due to the Covid pandemic and the lockdown and travel restrictions that ensued.

But fuel prices in India did not come down. This is because the government kept raising taxes as fuel prices fell. The Central and State Governments have been pursuing the policy of implementing that rule in economy in all other matters but forgets about it when it comes to fuel prices. Let’s not forget that some states have made concessions on tariffs but Kerala is not ready yet.

In the budget presented by Nirmala Sitharaman, the Agriculture Infrastructure and Development Cess or Agricultural Cess was introduced for petrol, diesel and other petroleum products. The cess is Rs 2.5 per liter for petrol and Rs 4 per liter for diesel.

Naturally, fuel prices should go up. But the finance minister has made it clear that the consumer will not have to pay more. The reason for this is that the basic excise duty and the special additional excise duty have been reduced in proportion to the increase in cess. If there is no difference in income then the question remains as to why the cess was imposed. Petroleum companies stand to benefit from the reduction in excise duty. If they do not pass on the profits to the government, will the price go up further? All these matters need to be clarified.

Or did the government put that burden on the shoulders of the common man in the form of cess when the tax helped the petroleum companies?

In any case, the experience of the people is that the price of petrol and diesel is increasing day by day. In the past, only a landlord could offered a car. That too, Ambassador. In those days, no one even enquired about the price of petrol and diesel. Is it like that now? In Kerala, even middle class people have two cars at home. Homes that do not have at least one two-wheeler are rare. As fuel prices rise, so do costs. Freight rates will increase. This can increase the price of everything. Economic growth will slow as inflation rises. But the easiest way for the government to increase revenue is to increase fuel tariffs. This is an old fashioned way. There may be a financial approach that thinks differently from this.
In India, 69 per cent of petrol and diesel prices are taxed. During the lock-down period, the central government had hiked excise duty on petrol and diesel by Rs 13 and Rs 16 per litre respectively. At present, the excise duty on petrol is Rs 32.98 and on diesel is Rs 31.83.

In Kerala, the tax on petrol is Rs 30.08 and on diesel Rs 31.83. Central and state governments are imposing tax hikes on oil companies. This will affect their income and profits. As a result, oil companies are reluctant to pass on these exemptions to consumers, as they are still liable to tax even if crude oil prices fall. This is the reason why fuel prices in India have not fallen in proportion to the fall in international crude oil prices. Another thing is that the international trade of crude oil is in dollars. That is, Indian companies buy crude oil using dollars. As the dollar appreciates against the rupee, oil companies' buying costs rise. In line with this, they will also increase petrol and diesel prices. This system continues here.
People will not be relieved of this tax burden unless they move over to the next technology like solar and electric battery.

Any government that wants to serve and help the people should place more emphasis on such research.