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Costing Rs.25 a litre and sold at Rs.88, Petrol in India to become dearer

A further increase in taxes on fuel would make the product in India most taxed globally

Monday October 26, 2020 7:20 PM, ummid.com with inputs from IANS

Petrol Price

New Delhi: Exploiting the situation arising out of the Coronavirus pandemic and subsequent pressure on revenues, Modi government is considering to raise excise duty on petrol and diesel.

Sources indicated that another Rs 3-6 per litre increase in excise duty on petrol and diesel may come soon if the government felt the need to mobilise more resources to finance additional "economic recovery packages".

This level of increase could provide government additional revenue to the tune of Rs 60,000 for full year. In the balance period, about Rs 30,000 crore could be mobilised.

An internal examination to look at duty structure on the two products is on and exact timing of the announcement may be finalised soon, sources indicated.

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Government wants that any duty hike on petrol and diesel should not result in an increase in the retail price of the two products as it would not be popular with the consumers besides the increase could have inflationary implications on the economy.

Global crude prices have softened and reached about $ 40 a barrel from a month ago high of over $ 45 a barrel. Modi government is considering to increase the fuel prices further even though the benefits of the decline in crude oil prices have not been passed to the consumers.

In March, the Narendra Modi government had taken Parliamentary approval to raise special additional excise duty on petrol to Rs 18 per litre and on diesel to Rs 12 per litre but did not change the levy then.

In May, it raised special additional excise to Rs 12 on petrol and to Rs 9 on diesel.

Considering crude oil price as $ 40 a barell (around Rs.18.62 a litre) and Rs.6 per litre refinery and other charges, fuel to India costs about Rs.25 per litre.

Adding taxes and excise duty, the Modi government is selling petrol at a whopping Rs.88 per litre (in Maharashtra). Despite earning a huge amount every litre of fuel, Modi government wants to hike the excise duty further, sources said.

A further increase in taxes on fuel would make the product most taxed globally. The current taxes account for close to 70 per cent of the price of petrol and diesel. With any further increase in duty, this could reach 75-80 per cent level.

With increased excise duty on petrol and diesel the government is already set to increase in oil revenue by close to Rs 1.75 lakh crore this year. This is in addition to over Rs 2 lakh crore it collects from petroleum products as annual excise revenue.

Centres fiscal situation is stretched this year due to Covid-19 related disruptions and additional commitments to states over GST compensation shortfall. The fiscal deficit is already estimated at a high of 8 per cent of GDP for FY21.

 

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