OIL PRICES: A BURNING ISSUE

In June this year, when fuel prices in India shot up after global crude prices crossed $80 a barrel, Union minister for oil Dharmendra Pradhan said there was little that the central government could do, but states should look at lowering the value added tax (VAT) on fuel. He also said that petrol and diesel needed to be brought under the Goods and Services Tax (GST) if their prices needed to be lowered. Three months later, the issue of high fuel prices has boiled over, with the Congress calling for a nationwide bandh on September 10, even as prices of petrol touched Rs 88.21 a litre and diesel Rs 77.41 in Mumbai. The bandh saw sporadic violence in a few states, but again it seemed the Centre could do precious little to lower fuel prices. That is, if it had any intention of doing so at all.

The reason for this is not hard to find. Traditionally, excise duties and VAT on fuel have been major sources of revenue for the central and state governments. In 2017-18, the central government earned revenues of Rs 2.84 lakh crore from taxes on petroleum and petroleum products, while state governments collected Rs 2.09 lakh crore. Taxes from petroleum comprise 36 per cent of the Centre’s tax revenues and 20 per cent of states’ tax revenues. The central government excise rate is fixed at around Rs 20 a litre on petrol and Rs 15.25 on diesel. The VAT and sales tax rates vary, from 16 per cent in Goa to