Why Petrol, Diesel Prices Could Not Come Down Immediately


Narendra Modi government has ruled out any reduction in the retail prices of petrol and diesel in the country even after a wide protest by opposition on Monday calling ‘Bharat Bandh’ across India. It was reconfirmed there won’t be any cut in the excise duty, but urged the states to take action.

Lately Andhra Pradesh announced cut in VAT on the auto fuel and this will result with immediate slash of prices by Rs 2 per litre. Rajasthan too announced the same with a 4 percentage point cut. However, these petty cuts are unrealistic when the prices of petrol and diesel are at record high in the country.

For Centre as well as states the taxes on auto fuel are a key revenue source and even a slide cut would hit the fiscal position drastically.

In 2016-17 Centre mopped Rs 2.42 lakh crore from excise duty of the sector and in 2017-18 the revenue was Rs 2.29 lakh. Presently Rs 19.48 per litre and Rs 15.33 per litre are charged as excise duty on petrol diesel respectively. Between November 2014 and January 2016 the excise duty was raised nine times and there was just one cut by Rs 2 per litre in October 2017.

On the other hand, the rates of VAT differ from state to state.

Apart from the taxes, both Centre and states adds dividend income, dividend distribution tax, corporate/income tax and profit on exploration of oil and gas on petroleum sector.



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