The Finance Ministry on 23rd April 2018– regarding the hike in petrol and diesel prices has stated that the center is not in favor of slashing the excise duty on fuel. An unnamed senior official told PTI that the Union Government wants states to cut sales tax or VAT on fuel.
The diesel price has hit a record high of Rs. 65.75 per litre. Meanwhile, petrol price have been hiked to Rs. 74.50 per litre– a 55-month high.
Also read – Why Petrol Prices Are So High In India?
The official also told PTI that an excise duty reduction wasn’t feasible as the government needs to remain in its plan to reduce budgetary deficit. The government is aiming to reduce the fiscal deficit to 3.3% of the gross domestic product from 3.5% of the last fiscal.
The official further mentioned to PTI, “Every rupee cut of excise on fuel will result in a loss of Rs 13,000 crore to the government”. He mentioned that the oil ministry hasn’t asked for a cut in excise duty yet. The official noted that states should cut VAT to ease the hike in petrol and diesel prices, and to ease the burden on the common man.
PTI reported that the official stated fiscal considerations are far more important than one or two rupee hike impact on common man, as it doesn’t impact inflation.
The union government exercises Rs. 19.48 per litre of excise duty on petrol. On diesel, the government levies Rs. 15.33 a litre. The VAT varies state to state. For example in Delhi, VAT on petrol is Rs. 15.84 and Rs. 9.68 per litre on diesel.
The hike in petrol and diesel prices can be solved if the geopolitical tension eases. The US shale oil could help ease the hike. The government is not in favor of interfering with the autonomy of oil PSUs to revise rates daily in line with the cost. According to a price notification, state-owned oil firms on 23rd April 2018 raised petrol and diesel rates by 10 paise per litre each in Delhi. They have been revising auto fuel prices daily since June 2017.
The hike in petrol and diesel prices has occurred due to firm international oil prices, on the back of a 32 paise increase in petrol rates effected over the last two days before 23rd April.
Now in the national capital, petrol is priced at Rs. 74.50 per litre (highest since September 2013, where rates had hit Rs. 76.06). The hike in diesel is the highest ever at Rs. 65.75.
Concerning petrol and diesel prices, India has the highest retail prices when compared to South Asian nations as taxes account for half the pump rates. Moreover, prices are revised daily by state-owned oil firms, which reflects cost changes.