Fuel prices are increasing in India for around eight daysin a row. Since the government has announced new Agriculture Infrastructure andDevelopment Cess in Budget 2021, the petrol becomes costlier by 3.75% whilediesel by 4.5% in last 17 days.
New Cess was termed as tax neural by the government as thefinance minister had contended that the excise duty on petrol and diesel hasbeen brought down by the same level. The government had said that it would nothave an effect on the retail prices of fuels. Diesel and Petrol prices have increasedeleven times since budget speech on February 1.
Petrol and Diesel are reported to be expensive by Rs 3.24per litre and Rs 3.47 per litre respectively in Delhi. The price rise havedifferent effects on different states since state tax varies.
The new cess was proposed in Budget 2021 at the rate ofRs 2.5 per litre on petrol and Rs 4 per litre on diesel. Ajay Bhushan Pandey,the finance secretary had said, it wouldmobilise Rs 30,000 crore in FY22 for development of infrastructure inagriculture.
According to reports, Petrol and Diesel have become mosttaxed commodity in India.
Whatis the basic price of Petrol and Diesel? How it witnessed tremendous hike?
Reportedly, the basic price of petrol is about Rs 31.82 perlitre but more than 65 per cent load of taxes has put its retail price whichthe customer gets at Rs 89.54 a litre in Delhi. Similarly, the basic price ofdiesel is mere Rs 33.46 a litre but load it with 60 per cent taxes and theretail prices comes to Rs 79.95 a litre.
Theextent of central and state taxes is about Rs 53.5 per litre in the case ofpetrol and Rs 43.5 per litre for diesel.
AfterCovid-19 lockdown, poor feeling the Pinch:
Fuels have become more expensive and job creation is atan all time low. Afte the Covid-19 induced lockdowns people have become poorwhile the rich in India are becoming richer. It is having a deleterious impacton the spending habits of people across India.
Lookingat the global price of fuel:
The price of fuel globally are on a boil because majorproducers have cut production. The duty had put petrol and diesel out of reachfor several consumers. Dharmendra Pradhan, the oil minister has reportedlyruled out any duty cuts in products at this juncture.
"There is a call for duty intervention now as levies were raised earlierwhen oil prices were low. A natural follow up of this would be to cut levieswhen oil prices faced extreme volatility. However, revenue constrainedgovernment during the pandemic seems to think otherwise," said a formeroil secretary not willing to be named.
Whyexorbitant taxes on Petrol and Diesel?
Taxes on petrol and diesel are an easy way of revenuegeneration for the government in India. It is with this idea that excise dutyon petrol and diesel were raised by historically high levels of Rs 10 and Rs 13per litre respectively in May last year at the height of the pandemic to mobilizeadditional resources required for relief measures. In fact, excise duty onpetrol increased by Rs 13 per litre and diesel by Rs 16 in two tranches onMarch 16 and May 5.
Howmuch does union government earn?
According to reports, the union government generated anadditional Rs 1.5 lakh crore from taxation on petrol and diesel in FY21. It isexpected to be tread a similar path in FY22. However, minor changes as aportion of revenue will also fall under the new cess, according to the budgetdocument.
How stategovernments earn?
Price rise also helps state government. It increasestheir revenue from the oil sector, for the Centre it means a high oil importbill at a time when it is stretched for cash and struggles to cope with the pandemic'seconomic downside. Costlier crude increased the import bill, shrinking thefinancial headroom the government enjoyed from the protracted spell of thesubdued oil market that followed the historic oil price crash in April, 2020.