Strange oil arithmetic

By Nagaland Post | Publish Date: 5/8/2020 12:47:09 PM IST

 India has the highest retail prices of petrol and diesel among South Asian nations as taxes account for about 40-50 percent of the pump prices [what the consumer pays at the petrol pump]. Petrol and diesel do not come under the purview of goods and services tax (GST). Other factors include excise duty, VAT, BS VI premium, marketing cost and margins, dealers commission etc. Also, more than 50 percent of the fuel price goes to central and state governments in taxes, making fuel one of the largest revenue earners for the government at the Centre and states. This is testimony to the Narendra Modi government’s first term when excise duty was cumulatively raised by Rs 11.77 per litre and on diesel by Rs 13.47 a litre between November 2014 and January 2016 to shore up its kitty by mopping up the much of the gains from oil prices sliding from $110/barrel in March 2014 to $40/barrel in June 2016. The tax was later cut by Rs 2 in October 2017 - months before the May 22, 2018 Karnataka polls- and by Rs 1.50 a year later. But excise duty was again raised by Rs 2 per litre in July 2019. In summation, in the past four years, the excise duty has been increased by 126 per cent in case of petrol and 330 per cent for diesel. Government hiked Rs 10 and Rs 13 per litre taxes on petrol and diesel respectively on May 6. In normal days, the ratio of taxes is usually 55% of per litre price charged to the consumers. However, the 75% taxes are exceptional case due to the recently hiked Excise duty by the government to offset the losses suffered due to the Coronavirus crisis. Oil prices have been coming down since January2020 but plunged 30% on Monday to $31/ barrel as Saudi Arabia announced hefty discounts and intention to pump up volumes in retaliation against Russia, which walked out of their three-year alliance over OPEC proposal to prop up prices by deepening production cut to 3.6% of global supply. Since January 11, globally petrol has become cheaper by more than Rs 6 per litre. While the government has kept the customers away from enjoying the real benefits of lower fuel prices, it has kept its tax collections strong. The Centre collected over Rs 2,14,000 crore from excise duty on oil sector in 2018-19 and has already collected over Rs 1,50,000 crore in the nine-month period of the current fiscal. The states have seen their VAT and sales tax revenues from the sector consistently increasing since FY 15, standing at over Rs 2 lakh crore in FY19 and Rs 1,50,000 crore in the nine-month period of FY20. What this means is that the bulk of the retail price a common man pays to get fuel is tax and if government would not have targeted petrol and diesel to raise revenue every time there is a pressing need for it, the fuel prices in India today would have mirrored retail prices prevailing decades ago (in 2003) and closer to what consumers in oil rich countries in the Gulf pay. Though the centre and state governments see fuel as the main source for ready revenue, high set price of fuel also adds inflationary pressure on the economy that would just not be right at this juncture when the country is fighting the coronavirus outbreak. 


Launched on December 3,1990. Nagaland Post is the first and highest circulated newspaper of Nagaland state. Nagaland Post is also the first newspaper in Nagaland to be published in multi-colour.

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