The Union Finance Minister Nirmala Sitharaman announced a reduction in fuel prices, saying that the government has decided to reduce taxes on petrol and diesel. Sitharaman tweeted, “We are reducing the central excise duty on petrol by Rs 8 per litre and on diesel by ₹ 6 per litre. This will reduce the price of petrol by Rs 9.5 per litre and of diesel by Rs 7 per litre.” She added it will have a revenue implication of around Rs 1 lakh crore per year for the government.
This comes as a relief for citizens in India as fuel prices have been increasing since the month of March. The Union Finance Minister said that this move is being taken as the Prime Minister called for relief for the common man. Sitharaman said that the Union government is also reducing the customs duty on raw materials and intermediaries for plastic products where India’s import dependence is high. This will result in a reduction of the cost of final products, she said.
Rates differ from state to state depending on incidence of local taxes such as VAT. Petrol now costs Rs 106.03 a litre in Kolkata (earlier Rs 115.12) and Rs 102.63 in Chennai (previously Rs 110.85). Diesel is priced at Rs 92.76 a litre in Kolkata (previously Rs 99.83) and Rs 94.24 in Chennai (earlier Rs 100.94).
This excise duty cuts along with Rs 5 cut on petrol and Rs 10 reduction on diesel effected from November 4, 2021, rolls back the Rs 13 per litre and Rs 16 per litre increase in taxes on petrol and diesel effected between March 2020 and May 2020 to avoid passing on to consumers the sharp fall in international oil prices at that time.
The excise duty hikes of 2020 had taken central taxes on petrol to their highest level of Rs 32.9 per ltire and that on diesel to Rs 31.8 a litre. After the latest excise cut, the incidence of central tax on petrol will come down to Rs 19.9 a litre and that on diesel to Rs 15.8 per litre.
"We are reducing the Central excise duty on Petrol by Rs 8 per litre and on Diesel by Rs 6 per litre. This will reduce the price of petrol by Rs 9.5 per litre and of Diesel by Rs 7 per litre," Sitharaman tweeted. "It will have a revenue implication of around Rs 1 lakh crore/year for the government."
She exhorted all state governments to also cut local sales tax or VAT. "I wish to exhort all state governments, especially the states where reduction wasn't done during the last round (November 2021), to also implement a similar cut and give relief to the common man," she said.
Post November 2021 reduction in excise duty on petrol by Rs 5 per litre and that on diesel by Rs 10 a litre, 25 states and UTs had cut VAT to give further reprieve to consumers battered by record-high retail prices. However, states ruled by non-NDA parties like Maharashtra, Andhra Pradesh and Tamil Nadu had not reduced VAT. Post that reduction, state-owned oil firms kept petrol and diesel prices unchanged for a record 137-day period during which international oil prices rose from $84 per barrel to a nearly 14-year high of $140. They finally broke the hiatus with a Rs 10 per litre increase on both petrol and diesel in 16 days starting March 22 but again hit the freeze button after the last revision on April 6.
This despite the fact that oil prices ruled above $100 per barrel and the gap between cost and selling price was as high as Rs 13 a litre on petrol and Rs 24 on diesel.
Holding of prices despite rise in cost had led to lower earnings of fuel retailers in the January-March quarter.
"Today, the world is passing through difficult times. Even as the world is recovering from Covid-19 pandemic, the Ukraine conflict has brought in supply chain problems and shortages of various goods. This is resulting in inflation & economic distress in a lot of countries," Sitharaman said.
WPI or wholesale price inflation touched a record high of 15.08% in April on price rise across all items. Retail inflation too rose to a near eight-year high of 7.79% in that month, remaining above the RBI's inflation target for the fourth straight month.
With PTI inputs