The rising petrol and diesel prices have kept the common man on tenterhooks and the recent price revision has made fuel costliest ever. India imported crude oil at an average rate of around $64 per barrel, a price compared to July 2009, when the corresponding prices of petrol and diesel were Rs 44.72 per litre and Rs 32.87 per litre, respectively. Even after factoring in hikes in refining charges, exchange rate and freight costs in the past nine years, the gap of almost Rs 30 a litre is unexplainable. Indeed, the catch is in extremely high rates of central excise and states’ levies. Both, the Centre and the states, took advantage of the falling international crude oil rates for almost three years since November 2014. As a result, consumer landed up paying the highest prices compared to consumers in Pakistan, Bangladesh, Nepal and Sri Lanka. The total incidence of the central excise and states’ VAT on petrol is about 48 per cent of their retail price in Delhi. Similarly, tax components on diesel are over 38 per cent in the Capital. The tax rates go significantly higher in different states because certain states charge as high as 40 per cent VAT. For the past three years, the Centre and states had taken an economically judicious decision to mop up a part of price gain through levies. Ideally, the several lakh crores of price benefits, which should have been passed on to the consumers, could have kept in a corpus to check the price fluctuation. Although, the government had constantly raised duties on petrol and diesel for the same reason, but now it is hesitant to forgo the easy flow of revenue. The Centre and states must immediately cut taxes on both petrol and diesel to provide respite to the common man and check inflation. The recent hike in fuel prices would add to the agony of the farmers in the coming harvest season which would have cascading effect on prices of food items.
