FUEL PRICE HIKE – 11TH DAY AND COUNTING…

about 3 months ago
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For the 11th straight day, petrol and diesel prices have been hiked. And currently when we all are fighting to keep ourselves simply alive, the fuel price protest is just a whimper. Its not as though we are not aware but there are simply too many other things to fight for and priorities have shifted a bit. Under normal circumstances, this simply would not have happened; 11 consecutive days is simply too much.

On one hand we keep on reading the headlines that the Gulf countries are worried as crude oil is down and with the fears of the second wave of virus creeping up, the some-what-recovered price has once again gone down. Yet, we in India seem to pay so muc more.

Today morning, the cost of petrol in Mumbai was Rs.83.62/litre and diesel at Rs.73.75/litre. The prices are as high as Oct’18 when crude oil was at $65/barrel and today, the price has almost halved to $35-40/barrel.

Oil Marketing companies or OMCs have thus seen a cumulative price hike of Rs.5.47/litre for petrol and Rs.5.80/litre for diesel. So the OMCs are trying to recoup all the losses it has made during the lockdown in one go itself.

The OMCs shrug and say that they are helpless as the finger should be pointed at the Govt which hiked the excise duty by a hefty Rs.10 on petrol and Rs.18 on diesel. Of this, the Govt has very thoughtfully explained that Rs.8 will go towards road and infrastructure cess while the remaining will account for special additional excise duty.

Now this is the tax by the Central Govt; every state too has its own set of Value Added Tax or VAT.

Delhi recently hiked its VAT by Rs.7.10/litre on diesel and by Rs.1.60/litre on petrol. So if you are filling petrol in Delhi, of the Rs.71.26 you shell out – Rs.49.42 will go towards central and State taxes. And for diesel, on every Rs.69.39/litre, Rs.48.09 will go towards tax. Thus 69% of what we pay for the fuel goes as tax – but for the tax, petrol price alone is Rs.21.84 despite the 11 price hikes.

And if living in Mumbai, you are paying the highest taxes on petrol prices in India as the state has the highest tax which includes VAT and additional surcharge. The VAT currently stands at 39.12% on petrol and 24.78% on diesel.

The base price of a litre of petrol supplied to dealers is Rs. 18.28, including freight. The rest are all taxes, aside from Rs. 3.56 per litre commission for the dealer.

So on one hand we have a slowing economy and on the other, a high fuel price. The Govt will say that it needs to take these desperate measures as its desperate times, what with GST and direct tax collections falling sharply.

It is politics and politics only which is making life so miserable for us Indians. Understand the math and realise that we are paying every single day through excise, VAT, surcharges for all that which the Govt spends. And in the coming days, we will only be paying more as the Govt will use the corona impact to the hilt.

The sad truth is that, corona or no corona, petrol and diesel are the biggest cash cow for both State as well as Central Govt. Ironically, neither the State nor the Center is able to generate enough money through investments and taxing has become the only way to feed the vote banks while following the subsidy policies.

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