Taxes now make up almost three-fourths of fuel prices

NEWDELHI: The basic prices of petrol and diesel sold in the country have slipped below ₹20 a litre due to a slump in global oil prices, but taxes on the fuels have soared over ₹47 a litre in Delhi after levies were raised sharply by the central and state governments.

This effectively means that while petrol in Delhi is now priced at ₹71.26 per litre, 69.35% of this is tax. Of the ₹32.98 a litre central tax on petrol, the Delhi government’s revenue income is ₹16.44 on every litre of the fuel sold in the state, according to government and industry data. In the case of diesel, it is retailed at ₹69.39 in Delhi, out of which around 68% is tax. The centre’s share from this tax is ₹31.83 per litre, the Delhi government’s share is ₹16.26 a litre. The price hike is a result of the Delhi government hiking the value-added tax (VAT) on both fuels early Tuesday, followed by the centre raising excise duty on petrol and diesel by ₹10 a litre and ₹13 per litre, respectively.

Earlier, on March 14, the union government had raised excuse duty on the two fuels by ₹3 a litre, but oil companies, having higher margins, absorbed the levies. While the latest increase in excise will eat into the margins of oil marketing firms, the rise in

VAT will affect the retail price.

According to officials with direct knowledge f the matter, the basic price of petrol dropped about 36% to ₹17.96 per litre on May 6 from ₹27.96 a litre on March 16, the day when fuel price was last revised. The basic price for diesel also dropped by over 41% at ₹18.49 per litre compared to ₹31.49 a litre on March 16.

Oil marketing companies, dominated by state refiners— Indian Oil Corp, Bharat Petroleum Corp Ltd and Hindustan petroleum Corp Ltd—used to fix petrol and diesel rates everyday on the basis of fluctuations in the international oil market. They, however, stopped the practice of daily revision since March 16 and absorbed gains of low international oil prices.

Experts said raising tax on petrol and diesel is the easiest way to raise revenue. A ₹1 per litre increase in excise duty on fuel would mean an additional ₹14,500 crore in annual revenue. “This would also help the centre earn revenue of about ₹1.2 lakh crore during remainder of FY21,” said SC Sharma, previously part of the erstwhile Planning Commission.