While Chennai Super Kings fans must be over the moon with the team winning the fourth IPL crown, motorists in Chennai must be aghast with the consistent rise in petrol and diesel prices. Over the past two days, both petrol and diesel has become costlier by 70 paise for them, even as their fossil fuel-tanking brethren in sister metros cities of Mumbai, Delhi and Kolkata face a similar situation. Paying more each day to travel the same distance – see ‘Price rise in 2 days’ table below.
Retail petrol and diesel prices are riding at their highest across the country, with new highs being scaled each time prices are hiked in paise per litre. Over the first 16 days of October 2021, petrol has become costlier by 3.48 a litre and diesel by Rs 4.31 a litre. There were no hikes on only two days of the month till now – October 12 and 13.
Highly taxed fuels: 54% for petrol, 48% for diesel
While there is little doubt that the daily fuel price increases are a result of soaring global crude oil prices – Brent crude is currently riding high at $84.84 a barrel – there is now a case for both the Central and state governments to seriously consider reducing taxes on these two fuels.
Unless the Central and State governments, which both levy stiff taxes on the two fuels, step in to cool the continuous price rise motorists will continue to pay the wallet-busting price at the fuel station. What’s more, in its meeting last month, the GST Council did not take any decision to bring these fuels under its purview.
Take a look at the current taxation of petrol and diesel – both Central and State – and you know why the motorist in India continues to fork out plenty of money for a litre of fuel. For instance, today (October 16), in Delhi, petrol costs Rs 105.49 a litre of which 31% (Rs 32.90) comprises excise duty and 23% (Rs 24.34) is State VAT (Value Added Tax). Club the two taxes and motorists are paying Rs 57.24 or 54% of each petrol litre as tax.
As regards diesel which cost Rs 94.22 a litre, the excise duty component is Rs 31.80 or 33.75%, while VAT is Rs 13.77 or 14.61% of the retail price. Together, the two taxes account for Rs 45.57 or 48% of the price a motorist pays to tank up on diesel. Since October 1, when diesel cost Rs 90.17 a litre in the capital city and included total taxes (excise + VAT) of Rs 44.99 or 49.89% of retail price, combined taxes have reduced by one percent
In FY2021, the Centre got Rs 334,894 crore excise duty from petrol and diesel. As Autocar Professional's Murali Gopalan wrote recently in his fuel pricing analysis, from the Centre’s point of view, it is only too well known that petrol and diesel account for a significant part of its revenue streams more so at a time when GST collections are little to write home about.
State governments across the country too mopped up significant revenue from taxes on petrol and diesel. States are also financially fragile which also puts in perspective the imperatives of levying value-added tax on auto fuels. While everyone is busy mopping up revenue during a difficult Covid period, it is the customer who is suffering silently. Or is being compelled to think electric. Meanwhile, CNG prices are also going up but that is a different story.