New Delhi: There is a need to review taxation on petrol and diesel to provide relief to consumers after rates touched an all-time high, HPCL chairman and managing director Mukesh Kumar Surana said on Wednesday.
One trigger after another has led to the 10th consecutive day of increase in retail selling price of petrol and diesel, but there is no case for going back on benchmarking domestic rates against international prices, he said.
Surana said he was not aware of any meeting called by Oil minister Dharmendra Pradhan or anyone else in the government to discuss the rising prices.
More than a week after the state-owned oil firms ended a 19-day pre-Karnataka poll hiatus on revising fuel prices, petrol and diesel rates have touched record highs. Petrol costs Rs76.17 per litre in Delhi while diesel sells for Rs68.34. In the last nine days, petrol price has risen by Rs2.54 a litre and diesel by Rs2.41. “We should find methods to handle (such) situation from time to time," he said.
Oil marketing companies, which are volume driven, operate on a thin margin and as such cannot do much if the international cost of oil rises, he said. “We have to maintain our capex plans and growth plans," Surana reasoned.
The solution has to be found while balancing the budgets of oil companies, the consumer and the government, he said. While the consumer has price sensitivities even though he has not shown any trend of moderating consumption in the face of rise in prices, the government heavily relies on oil revenues to meet its spending budget. “There is need to review taxation on the fuel," he said without elaborating.
A cut in excise duty combined with states being asked to reduce value added tax (VAT) is on the cards. The central government levies Rs19.48 excise duty on a litre of petrol and Rs15.33 on diesel. State sales tax or VAT varies from state to state. Unlike excise duty, VAT is ad valorem and results in higher revenues for the state when rates move up.
In Delhi, VAT on petrol was Rs15.84 a litre, and Rs9.68 on diesel in April. Today, it is Rs16.41 on petrol and Rs10.05 a litre on diesel. Every rupee cut in excise duty on petrol and diesel will result in a revenue loss of Rs13,000 crore.
Surana said financial health of oil companies has to be maintained while providing a comfort to consumers. He, however, said going back to a cost-plus method of calculating prices as against the current methodology of pricing fuel at a 15-day moving average of benchmark international product price would be a retrograde move.
The long-term solution is bringing petroleum products under the Goods and Services Tax (GST) regime, he said, adding it was not true that oil companies were making big profit with rising prices. They were only passing on the cost of input to consumers, he said.
The GST, which subsumed over a dozen central and state levies including excise duty, service tax and VAT, was implemented from 1 July but crude oil, natural gas, petrol, diesel and ATF were kept out of its purview for the time being.
The government had raised excise duty nine times between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs2 a litre. Subsequent to that excise duty reduction, the Centre had asked states to also lower VAT. Just four of them— Maharashtra, Gujarat, Madhya Pradesh and Himachal Pradesh—reduced rates while others including BJP-ruled ones ignored the call.
In all, duty on petrol rate was hiked by Rs11.77 and that on diesel by Rs13.47 a litre in those 15 months that helped government’s excise mop up more than double to Rs2,42,000 crore in 2016-17 from Rs99,000 crore in 2014-15.