Diesel turned costlier by Rs 8.78 a litre, petrol by Rs 7.55 in October

Like the Indian cricket team at the ongoing T20 World Cup, Indian motorists are taking a hammering, albeit they have little chance of a fight-back when it comes to tanking up on the fuel of their choice – petrol or diesel. That is unless the Central and various State governments intervene to cut their respective taxes.

The month of October 2021 has set a record when it comes to monthly price increases in the two fossil fuels. While the cost of diesel has risen sharply by Rs 8.78 a litre – or 8.97% – petrol in Mumbai became costlier by Rs 7.55 a litre – or 6.99% last month.  The price differential between the two fuels is now just Rs 8.88.

 Meanwhile, Mumbai’s fossil fuel-using brethren in the three other metros also have their wallets lightened by similar amounts (see detailed price table above) following the price rise for the sixth day in a row. When it comes to the average price rise, diesel is easily beating petrol. And November 2021 has opened today with a price hike of 35 paise a litre for petrol and 39 paise a litre in Mumbai.

Highly taxed fuels: 53% for petrol, 48% for diesel 
While there is little doubt that the daily petrol and diesel price increases are a result of soaring global crude oil prices – as of October 31, Brent crude was riding at $83.63.In September 2021, it cost an average $74.49 per barrel and in August, $70.75 per barrel. Nonetheless, there is now a case for both the Central and state governments to seriously consider reducing taxes on these two fuels to reduce the burden on hapless motorists and the industry at large. Rising fuel prices, of course, speedily add to overall inflation which is so evident across the country.

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 (as of November 1, 2021) – and you know why the motorist in India continues to fork out plenty of money for a litre of fuel. For instance today, in Delhi, when petrol costs Rs 109.69 (up by Rs 4.20 a litre in 15 days and Rs 7.55 in 31 days), 30% (Rs 32.90) comprises excise duty and 23% (Rs 25.31) is State VAT (Value Added Tax). Club the two taxes and motorists are paying Rs 58.21 or 53% of each petrol litre as tax.

As regards diesel which today costs Rs 98.42 a litre (up by Rs 4.20 in 15 days and Rs 8.25 a litre in 31 days of October), the excise duty component is Rs 31.80 or 32.81%, while VAT is Rs 14.37 (up from Rs 13.77 on October 15) or 14.60% of the retail price. Together, the two taxes account for Rs 46.17 or 48% of the price a motorist pays to tank up on diesel.

Aviation turbine fuel much cheaper than petrol, diesel
Interestingly, petrol and diesel cost far more than aviation turbine fuel (ATF) which is sold to airlines and on which aircraft are tanked up. ATF prices are revised every fortnight in line with global benchmarks. The price of ATF, applicable from  November 1, in Mumbai, is Rs 81,050.70 a kilo-litre (1,000 litres) or Rs 81.05 a litre – which makes it Rs 34.45 a litre cheaper than petrol (Rs 115.50 as of today) and Rs 25.51 a litre cheaper than diesel (or 25.64%) that is sold to motorists in Mumbai. Between October and November 2021, ATF prices have risen by 14.34% – from Rs 70,880.33 a kilo-litre on October 1 to Rs 81,050.70 on November 1, mirroring the rise in global crude prices.

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 even as the country comes out of the pandemic, it is the customer who continues to suffer silently. Or is being compelled to plug into electric vehicles. Meanwhile, CNG prices are also going up but that is a different story.