Hardly a day after announcing the one-off excise duty cut and PSUs subsidising fuel, petrol and diesel prices on an upward tick again and having hit a three week high, as per a PTI report. The prices of petrol and diesel were reduced by a minimum of Rs.2.50 on October 5, when the Union Government’s only second cut in excise duty of Rs.1.50 a litre and state-owned fuel marketers providing a Re 1 a litre subsidy came into effect. The reduction was higher in the BJP ruled states as they matched the cut with a similar reduction local sales tax or VAT, noted the report.
Nevertheless, the prices of fuel products were showing a surge from the very next day as the petrol price was increased by 18 paise a litre on October 6 and 14 paise today, citing the daily price notification issued by the state-owned oil companies, the report pointed out. In Delhi, petrol price was cut to Rs.81.50 on October 5, today the price got revised to Rs.81.82. Also, the diesel price was also increased by 29 paise a litre each on October 6 and today. Now, diesel is costing Rs.73.53 a litre which is up from Rs.72.95 on October 5, the report said.
Despite the Delhi Government deciding not to reduce VAT on fuel, the fuels are still the cheapest in all metros and majority of the state capital as it levies low taxes. Despite reducing VAT on petrol, the Mumbai market still has the highest priced fuel. Petrol in Mumbai is selling at a price of Rs.87.29 per litre today and diesel Rs.77.06, said the report and added that petrol prices had hit an all time high of Rs.84 a litre in Delhi and Rs.91.34 in Mumbai on October 4. At the same time diesel prices too had gone up to Rs.75.45 per litre in Delhi and Rs.80.10 in Mumbai. Following the twin decision, they declined to Rs.81.50 a litre of petrol in Delhi and Rs.86.97 in Mumbai. Diesel prices dipped to Rs.72.95 in Delhi and Rs.77.45 in Mumbai on October 5. Today, the rates hit a three-week high. Private retailers such as Nayara Energy (Earlier Essar Oil) too are matching PSU rates by reducing fuel price by Re 1 per litre.
After the Union Government slashed the excise duty by Rs.1.50 a litre and asked PSU oil marketers to reduce fuel price by Re 1, Maharashtra and Gujarat Governments were among the first to announce a matching Rs.2.50 reduction fuel prices. They were later joined by Chhattisgarh, Jharkhand, Tripura, UP, MP, HP, Haryana, Assam, Uttarakhand, Goa and Arunachal Pradhesh with similar moves, said the report and added that the J&K Government, which is currently under Governor’s rule, too had relaxed the prices of petrol and diesel. Furthermore, Maharashtra had only cut VAT on petrol and not on diesel. Even before the excise duty cut, Rajasthan, West Bengal, Karnataka, Kerala and Andhra Pradesh had reduced VAT last month to cushion consumers for a spate of price increases.
The reduction in excise duty, only the second in four years of BJP-led NDA rule, will dent the Union Government revenues by Rs.10,500 crore and was aiming at cooling retail prices that had increased to an all time high. The BJP-led Government had increased excise duty on petrol by Rs.11.77 per litre and that on diesel by Rs.13.47 a litre in nine installments between November 2014 and January 2016 to shore up finances as global oil prices declined, but when cut the tax just once in October last year by Rs.2 per litre, the report added. Prior to Octber 5 cut, petrol price rose by Rs.6.86 per litre and disel by Rs.6.73 since mid-August – the most in any six-week duration after the daily price revision was introduced in mid-June last year.
Citing industry sources, the report further added that for state-owned fuel marketers absorbing Rs.1 a litre price would mean a Rs.9,000 crore hit on profits on an annualised basis. For the remainder of current fical, it would be Rs.4,500 crore, with IOC’s share being roughly half and the rest is split equally between HPCL and BPCL.
As per the report, almost half of the fuel price is made up of taxes. The Union Government, prior to excise duty cut, levied a total of Rs.19.48 a litre of excise duty on petrol and Rs.15.33 per litre on diesel. On top of this, states levy VAT as well. The increase in excise duties in 2014-16 had led to excise collectionns from petrol goods increasing from Rs.99,184 crore in 2014-15 to Rs.2,29,019 crore in 2017-18. States saw their VAT revenue increase from Rs.1,37,157 crore in 2014-15 to Rs.1,84,091 crore in 2017-18, the report added.