High Gas and Diesel Prices in India Prompt Smuggling of Fuel
(Bloomberg) -- Pump prices are so high in India that some of the gasoline and diesel exported to neighboring countries is being smuggled back through porous land borders.
A large oil truck loaded with 1,360 liters (359 gallons) of diesel that was being smuggled to India, where pump prices are at a record, was held last week in Nepal, the police said in a statement.
Pump prices of gasoline, which have breached the 100 rupee a liter mark in several parts of India, are the highest in the South Asian region, according to data compiled by GlobalPetrolPrices.com. That’s resulting in illegal trade as Indians grapple with soaring fuel prices. Ironically, Nepal gets all its petroleum fuels from India, which also exports to neighbors Bangladesh and Sri Lanka.
“Smuggling has become rampant as prices are cheaper in Nepal because of tax differentiation,” said Ravi Bharti, who operates a gas station at Adapur in eastern India’s Bihar state, less than 3 kilometers (2 miles) from the Nepal border. “This is severely impacting our sales.”
While the increase in pump rates is the result of a sharp recovery in the prices of global crude oil, taxes have remained stubbornly high, making up closer to 60% of what consumers pay in India. Prime Minister Narendra Modi and his oil minister Dharmendra Pradhan have been fending off criticism by shifting the blame for high prices on previous governments and production cuts by some oil exporting nations.
In the wake of Covid-19, both the federal and state governments need to generate taxes for increasing spending and generating more jobs, Pradhan told ANI explaining why fuel prices are high. “This is why we need this tax but there is also the need for balance. I believe Finance Minister can find a way,” he said.
Daily sales of gasoline and diesel at his refilling station have dropped to 1,200 liters from 1,800 liters earlier, Bharti said. “Vehicles are now refilling from roadside vendors, who are selling the smuggled fuels much cheaper.”
Modi has drawn criticism for the rise in fuel prices, a politically sensitive subject, not only from his rivals but also from some members of his own Bharatiya Janata Party. India imports 85% of its crude oil requirements, making it the world’s third-biggest buyer.
©2021 Bloomberg L.P.