PremiumOver 60% of the retail price of petrol goes as excise duty and VAT. As crude prices climb again, it is the tax component that needs to be addressed for Indian consumers to get any relief.
Fuel prices are on the rise again. On Tuesday, petrol cost Rs89.29 a litre in Delhi, while diesel cost Rs79.70 a litre. In some parts of India, for example in Rajasthan and Madhya Pradesh, petrol even crossed the Rs100 mark for the first time.
Part of the reason is recovering crude oil prices, even as central and state taxes remain a pain point. These taxes were raised last year as the pandemic dried up other revenue sources for the government. The elevated taxes kept fuel prices up in India even though crude oil prices had crashed and stayed low for much of 2020.
The current petrol price break-up in Delhi shows 60% of what you pay at the gas station goes as excise duty and value-added tax. Just about 40% is the price of crude oil.
When the Congress-led government was in power between 2004 and 2014, the crude component was around 51% on average, and taxes and other charges comprised 49%. During the Narendra Modi government’s tenure, the share of taxes in the retail price has climbed up from 45% in late 2014 to an average of over 67% in the two months of 2021 so far.
Since February 2020, petrol has become costlier by over Rs17.50 a litre, and diesel by nearly Rs16 a litre. This also means the Centre’s revenues got a reprieve in the pandemic-hit year just from fuel taxes.
Indian consumers did not get the benefit of falling international prices of oil last year. Now, recovering crude prices are pushing petrol prices further up. If taxes remain where they are, relief for the end consumer may be some time away.
