How bringing oil under GST will rationalise petrol/diesel pricing | The Financial Express

Petrol and diesel prices have lately skyrocketed and, in some cities, the price of petrol hit Rs 85 per litre. In fact, on per-litre prices of petrol, India has one of the world’s highest figures. Several macroeconomic indicators such as the national import bill (India imports more than 80% of its crude oil demand), the currency value and the current account deficit are adversely affected by oil price spikes, which also have a knock-on effect on inflation through increase in transport and other costs, and dampen economic growth.

In the wholesale price index, petroleum products have nearly 8% weight. According to the Petroleum Planning and Analysis Cell estimates, if the price of petrol and diesel increases by Rs 1 per litre, it shoots up inflation by 0.03% and 0.08%, respectively. This is something that politicians may be wary about in the short run when elections loom. Like any macroeconomic problem, sharp spikes in oil prices in India can be attributed to both national and global factors. We begin with domestic factors.

Brent, the global benchmark oil price, has a history of sharp volatility. It was priced at $115 a barrel in mid-2014, less than $30 in early 2016, and $45 a barrel in mid-June 2017. By mid-May 2018, it has hit a price of $80 a barrel, touching the highest since November 2014.

Read complete article here:

How bringing oil under GST will rationalise petrol/diesel pricing – The Financial Express.