Social media is flooded with memes about the record high fuel prices in India. Whilst high fuel prices has been a common theme in India irrespective of which political party is in power, exactly how high is this, relative to purchasing power? In this data driven blog of Business Standard – Number Wise, Abhishek Waghmare puts out three data points which stand out and in some ways explain why this is unlikely to change.
First, it shows what percentage of daily average income does a litre of petrol cost – as the subject says, it is almost a third. Whilst the average income is skewed in a country like India, it does affect the bottom of the pyramid more, indirectly through transportation costs of most daily essentials. And how does it stack up against other countries in the world: based on the chart in the article, only countries like Burundi, Afghanistan, Yemen show up higher on this metric. Even Pakistan and Bangladesh are less than a fifth, the developed world is in mid to low single digits.
Second and more fascinating is why the retail price is so high – taxes. How heavily is fuel taxed in India? As the chart shows, more than half the retail price is tax making fuel one of the most heavily taxed product in India, comparable with import duties on wine and scotch, even higher than imported motorbikes and luxury handbags.
Third is the explanation for why governments across regimes have had little choice in the matter – fuel taxes are a significant source of revenue for the government, as high as 28% in FY21 to the centre.
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Note: the above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services. Marcellus Investment Managers is also regulated in the United States as an Investment Advisor.
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