Fuel prices are increasing in India for around eight days in a row. Since the government has announced new Agriculture Infrastructure and Development Cess in Budget 2021, the petrol becomes costlier by 3.75% while diesel by 4.5% in last 17 days.
New Cess was termed as tax neural by the government as the finance minister had contended that the excise duty on petrol and diesel has been brought down by the same level. The government had said that it would not have an effect on the retail prices of fuels. Diesel and Petrol prices have increased eleven times since budget speech on February 1.
Petrol and Diesel are reported to be expensive by Rs 3.24 per litre and Rs 3.47 per litre respectively in Delhi. The price rise have different effects on different states since state tax varies.
The new cess was proposed in Budget 2021 at the rate of Rs 2.5 per litre on petrol and Rs 4 per litre on diesel. Ajay Bhushan Pandey, the finance secretary had said, it would mobilise Rs 30,000 crore in FY22 for development of infrastructure in agriculture.
According to reports, Petrol and Diesel have become most taxed commodity in India.
What is the basic price of Petrol and Diesel? How it witnessed tremendous hike?
Reportedly, the basic price of petrol is about Rs 31.82 per
litre but more than 65 per cent load of taxes has put its retail price which
the customer gets at Rs 89.54 a litre in Delhi. Similarly, the basic price of
diesel is mere Rs 33.46 a litre but load it with 60 per cent taxes and the
retail prices comes to Rs 79.95 a litre.
The
extent of central and state taxes is about Rs 53.5 per litre in the case of
petrol and Rs 43.5 per litre for diesel.
After Covid-19 lockdown, poor feeling the Pinch:
Fuels have become more expensive and job creation is at an all time low. Afte the Covid-19 induced lockdowns people have become poor while the rich in India are becoming richer. It is having a deleterious impact on the spending habits of people across India.
Looking at the global price of fuel:
The price of fuel globally are on a boil because major
producers have cut production. The duty had put petrol and diesel out of reach
for several consumers. Dharmendra Pradhan, the oil minister has reportedly
ruled out any duty cuts in products at this juncture.
"There is a call for duty intervention now as levies were raised earlier
when oil prices were low. A natural follow up of this would be to cut levies
when oil prices faced extreme volatility. However, revenue constrained
government during the pandemic seems to think otherwise," said a former
oil secretary not willing to be named.
Why exorbitant taxes on Petrol and Diesel?
Taxes on petrol and diesel are an easy way of revenue generation for the government in India. It is with this idea that excise duty on petrol and diesel were raised by historically high levels of Rs 10 and Rs 13 per litre respectively in May last year at the height of the pandemic to mobilize additional resources required for relief measures. In fact, excise duty on petrol increased by Rs 13 per litre and diesel by Rs 16 in two tranches on March 16 and May 5.
How much does union government earn?
According to reports, the union government generated an additional Rs 1.5 lakh crore from taxation on petrol and diesel in FY21. It is expected to be tread a similar path in FY22. However, minor changes as a portion of revenue will also fall under the new cess, according to the budget document.
How state governments earn?
Price rise also helps state government. It increases their revenue from the oil sector, for the Centre it means a high oil import bill at a time when it is stretched for cash and struggles to cope with the pandemic's economic downside. Costlier crude increased the import bill, shrinking the financial headroom the government enjoyed from the protracted spell of the subdued oil market that followed the historic oil price crash in April, 2020.