As crude oil prices in the global market saw a freefall, the retail prices of petrol and diesel were expected to significantly fall too. However, the rate-relaxation that was expected on the streets could not reach the petrol pumps. The offset is caused due to a surprise hike in the special excise duty on petrol and diesel by Rs 2 per litre and road cess by Re 1 per litre by the government. This offset may further increase as after the centre’s decision to increase duty, even the states may go for a hike in duty. "With the central government increased the rate of central excise duties, we also foresee states to raise the value-added tax (VAT) on petrol and diesel," said a report by Care Ratings. State governments not only follow a different tax rate regime but also levy taxes on an ad-valorem basis, it added.
Petrol and diesel prices in India have not seen an uptick in the last 24 days. Today, the petrol price stood at Rs 69.59 per litre while diesel price stood at Rs 62.29 per litre in Delhi, according to IOCL. Retail prices of petrol and diesel have fallen by 7.1 per cent and 5.3 per cent since the beginning of December 2019. Even after the implementation of increased excise duty, the fuel prices have fallen by 0.4 per cent to date.
To gain extra revenue on the back of falling crude prices in the global market, the government has recently increased special excise duty on petrol and diesel by Rs 2 per litre and road cess by Re 1 per litre. Now the government will be collecting around 134 per cent taxes including excise duty and VAT on the base price of petrol and 88 per cent in the case of diesel.
Meanwhile, the oil prices in the international market have seen a freefall in recent months as the coronavirus (Covid-19) pandemic has brought the businesses across the world to a standstill. Drastic fall in overall demand has also cut the demand for fuel and thus there is a supply glut, continuously taking the prices down. Ironically, at a time when the OPEC nations should have come together to cut the supply, nations like Russia, UAE, and Saudi Arabia are planning to further increase their oil supply and escalating a price war.