Four states lead the way; cut taxes as fuel prices skyrocket in country

Amid spiralling fuel prices, four states have cut taxes to provide relief to consumers. Rajasthan had last month announced a reduction of Value Added Tax (VAT) from 38 per cent to 36 per cent, followed by the poll-bound state of West Bengal, which cut VAT on petrol and diesel by Re 1 yesterday. Assam has also withdrawn an additional tax of Rs 5, which was imposed last year to generate revenue amid the Covid-19 crisis. The state of Meghalaya has given the biggest relief by cutting Rs 7.4 per litre on petrol and Rs 7.1 on diesel. It has also cut VAT on petrol and diesel by Rs 2.

On the other hand, the Centre has refused to cut excise duty despite the unprecedented rise in fuel prices in the past two months. As the Centre imposed the first lockdown in March 2020, it had raised excise duty by Rs 13 per litre on petrol and Rs 16 per litre on diesel from March-May 2020. Interestingly, crude oil prices at that time hovered around Rs 19.9 per barrel.

In his response, Union Petroleum and Natural Gas and Steel Minister Dharmendra Pradhan blamed it on oil-producing countries for "less fuel production". "There are two main reasons for the fuel price rise. The international market has reduced fuel production and manufacturing countries are producing less fuel to gain more profit. This is making the consumer countries suffer," Pradhan said on Sunday in Assam's Dhemaji where PM Modi will hold a rally today, reported ANI. The minister said the Centre has requested OPEC and OPEC Plus countries to increase output.

Also Read: Fuel prices hiked for 11th day in row; petrol past Rs 90 per litre for first time ever in Delhi

However, despite the minister's claims, the breakup of fuel per litre price reveals a different picture. As per the latest prices, petrol and diesel in Delhi cost Rs 90.58 and Rs 80.97 a litre, respectively, while crude oil costs Rs 63/barrel. While Petrol and diesel cost around Rs 71.89 and Rs 64.65 per litre in Delhi a year ago, crude oil was priced at Rs 54.63 per barrel.

As the lockdown hurt the Centre's revenues, it has increased excise duty on petrol by 64 per cent from Rs 19.98 to Rs 32.90 per litre and from Rs 18.23 to Rs 32.90 on diesel during the same period. VAT on petrol, on the other hand, has been increased from Rs 15.25 to Rs 20.61 per litre, while it went up from Rs 9.48 to Rs 11.8 per litre on diesel.

Also Read: Fuel prices hiked for 12th straight day; Petrol nears Rs 100 in Mumbai, check rates in your city

The last time the Centre offered relief in taxes was in October 2018 when excise duty was cut Rs 1.50 per litre and fuel retailers were asked to match the cut as petrol prices had hit Rs 80 per litre mark and diesel by Rs 77/litre. Besides, some 18 states had cut VAT by Rs 5 per litre to pass the relief on to the consumer.

Fuel prices touched new highs across metros on Saturday, while they remained unchanged since then. As per the latest price, petrol and diesel in Delhi cost Rs 90.58 and Rs 80.97 a litre, respectively, while the prices stood at Rs 97 and Rs 88.60 per litre in Mumbai. In February, petrol prices have gone up by Rs 4.29 per litre and diesel by Rs 4.31 per litre in Delhi so far.

Also Read: Rising petrol, diesel prices a 'dharm sankat'; Centre-states must work to lower fuel rates, says FM Sitharaman