October has dawned and brings along with another price hike. Between yesterday and today, petrol price in Mumbai has risen by 24 paise a litre and that of diesel by 32 paise. Today’s fuel prices – Rs 107.95 for a petrol litre and Rs 97.84 for a diesel litre – are the highest yet in Mumbai and India.

Of the four metros, motorists in Mumbai pay the most for their choice of fuel while Chennai motorists pay the least for petrol (thanks to a recent Rs 3 a litre VAT price cut by the state government) and Delhiites pay the least for diesel.

Seen over a period of 12 months, from October 1, 2020 to today, October 1, 2021, petrol has become more expensive by Rs 20.41 a litre and diesel by Rs 20.91 in Mumbai. And seen over a period of 18 months, from April 1, 2020, when BS VI emission norms kicked in, petrol is dearer by Rs 32.67 a litre and diesel by Rs 32.65. See the detailed price table below.

Highly taxed fuels: 55% for petrol, 50% for diesel 
Last month the GST Council did not take any decision to bring these fuels under its purview. Which means that motorists will continue to pay wallet-busting prices to run their vehicles, unless they are using CNG or have made the shift to electric.
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 (Octber 1), in Delhi, petrol costs Rs 101.89 a litre of which 32.28% (Rs 32.90) comprises excise duty and 23% (Rs 23.51) is State VAT (Value Added Tax). Club the two taxes and motorists are paying Rs 56.41 or 55.36% of each petrol litre as tax.

As regards diesel which cost Rs 88.62 a litre, the excise duty component is Rs 31.80 or 35.26%, while VAT is Rs 13.19 or 14.62% of the retail price. Together, the two taxes account for Rs 44.99 or nearly 50% of the price a motorist pays to tank up on diesel.

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.

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.

There is also the case of the government – both Centre and States – aggressively driving the adoption of electric vehicles and electric mobility. While a number of states including Delhi, Maharashtra, Tamil Nadu, Telagana, Rajasthan, Assam nd Kerala have introduced subsidy and incentive-laden EV policies, the givernment's recently announced PLI Scheme for India Auto Inc with an outlay of Rs 26,058 crore has given a huge fillip to the EV industry.