Indian motorists to pay up to 10 times more in taxes to refuel than in 2014

by Mayank Dhingra 06 May 2020

In a move to recover its lost revenue which has seen a significant drought all through the last 42 days of the ongoing nationwide lock-down in place, the Central government has hiked the indirect taxes on fossil fuels in the country.

The government through its Central Board of Indirect Taxes and Customs notified late Tuesday an increase in the ‘special additional excise duty’ on petrol and diesel by Rs 2 per litre, while also jacking up the ‘road and infrastructure cess’ by Rs 8 on a litre of both fuels.

While the revision in the tax and corresponding cess means a net hike of Rs 10 and Rs 13 for a litre of petrol and diesel, respectively, the update would not bring any change to the retail prices of the two fuels at the nozzle level because the international crude prices which determine the base price in the entire maximum selling price calculation, are at an all-time low with flights, buses, cars and motorcycles keeping away from the roads in most countries around the world amidst the Covid-19 pandemic.

In fact, the pandemic created an alarming situation when global crude oil prices created history by touching an all-time low of US$ minus 37.63 per barrel on April 20.

No relief for motorists
Interestingly, the Indian consumer and motorist will have to continue paying more for fuelling up today than in 2014, even when global Brent oil prices were soaring at US$ 100 per barrel, as against sitting at a significantly lower US$ 30 per barrel in the present scenario.

The excise duty component on a litre of petrol in New Delhi has grown from Rs 9.60 in 2014 to Rs 32.98 at present, to comprise 46.28 percent of the net retail price of Rs 71.26 in New Delhi as on May 6. Moreover, the government had recently hiked the excise duty on both fossil fuels by Rs 3 per litre on March 14.

Similarly, excise duty on a litre of diesel has moved from being at Rs 3.50 to Rs 31.83 over the last six years, commanding a 45.87 percent hold in the overall price, which now sits at Rs 69.39 per litre in New Delhi after the state government hiked the local tax - VAT – on the retail of fuels in New Delhi yesterday to compensate for the loss of revenue during the last month-and-a-half of negligible economic activity in the city.

The value added tax on petrol stood at 20 percent in 2014 as against getting revised to 30 percent in the capital on May 5, while diesel has seen a movement from 12.50 percent in 2014 to 30 percent as of date.

The move is being touted as being prim by vehicle users who are already suffering financial setbacks due to decreased incomes, furloughs and job losses as the immediate repercussions of the extended lock-down to curb the spread of the coronavirus. As things stand, most will need to use their personal vehicles over public transport to travel as they maintain social distancing going forward, the pinch will only be harder and felt by the middle-class Indian.