On 4 September, a consumer paid 79.31 to buy a litre of petrol and 71.34 for a litre of diesel at an Indian Oil petrol pump in New Delhi. But there’s much goes into buying a litre of petrol, in financial terms, from just before leaving the Indian Oil refinery to the time you buy it.

While Indian charges the petrol pump dealer 39 for that litre of petrol, it itself pays 19 as excise duty to the central government. Another 17 goes towards value-added tax (VAT) paid by the company and the dealer to the state government. Add a dealer’s commission, and that’s the price you pay for your fuel—which is effectively double of what it was when it was about to leave the refinery.

On Tuesday, the government said it will not cut the excise duty on petrol and diesel to cushion the spiralling prices as it has limited fiscal wiggle room to take any hit in revenue collection.

With oil imports becoming costlier due to a depreciating rupee vs dollar, the government believes the current account deficit will overshoot the target and it cannot “disturb the fiscal math by cutting excise duty on petrol and diesel", according to the official quoted above.

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