Govt Not Keen On Cutting Taxes On Auto Fuel Despite Surging Prices

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Swastika Dubey
Swastika Dubey
Swastika Dubey is a content writer who loves to write about trending entertainment topics, fashion, and lifestyle. She also loves to listen to classic old Hindi songs and travel to new places in her leisure time. Her writing is well researched, covering important aspects and core of the topic covering crucial points.


  • Following a high-level review of rising global oil prices, the decision to maintain the status quo on taxes was made.
  • Top government officials said it would be difficult for the central government to reduce fuel excise duty, citing higher costs incurred during the Covid-19 outbreak.
  • In more than two dozen cities, the price of petrol has already surpassed Rs 100 per litre.

Despite retail petrol prices breaking the ₹100 per litre mark in various locations throughout the country, the Union finance ministry has opted to hold off on making any tax modifications. Following a high-level review of the growing trajectory of global oil prices, the decision was made.

When the second wave of the covid-19 pandemic rages across the country, the Centre’s decision comes amid mounting expenses to promote an economic rebound and boost India’s healthcare infrastructure.

Because they collect value-added tax (VAT) as a proportion of the price, states benefit more from a surge in oil prices, thus the central government wants states to be on board for a possible coordinated tax rate revision. Unlike state VAT, national excise duty is a fixed amount per litre in rupees and generates more money only when consumption rises, not when prices rise.

“In June, we had a meeting where we discussed the oil price trend. Tax adjustments are yet to be decided. “It is a fact that both the Central and state governments require revenue at this time,” said a government official requesting to be anonymous.

At a press conference on July 2, Union Finance Minister Nirmala Sitharaman remarked that both the central and state governments levy taxes, and that the issue of rising oil prices was “quite complex.” State taxes are calculated on an ad valorem basis, according to the minister, and both the central and state governments must discuss it.

Crude oil prices may reach $100 a barrel by next year, according to commodity experts, as travel demand recovers, Bloomberg news agency said on June 21, citing Bank of America Corp.

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As per the official, the finance ministry has not performed any research to make its own forecasts about the trajectory of oil prices in the future months.

A further rise in oil prices, on the other hand, would be very problematic for Prime Minister Narendra Modi’s government, which has profited from low global prices, allowing it to raise more tax revenue to fund welfare initiatives.

Revenue losses from GST relief, as well as corporate and personal income tax relief, were somewhat balanced by revenues from central excise collections, primarily from petrol and diesel. This is in addition to the money saved since October 2014, when diesel prices were deregulated.

Although state-run oil marketing corporations (OMCs) have price-setting freedom, they sometimes calibrate price revisions so that daily fluctuations are flat. The retail prices of auto fuel have been adjusted by OMCs based on international prices. Local petrol and diesel pricing are based on worldwide finished fuel prices rather than crude. While the global price of petrol and diesel is mostly determined by the cost of crude oil, there are frequent swings according to the state of demand and supply for each fuel.

Petrol is currently sold at more than 100 rupees per litre in India’s four metros.

On Monday, diesel prices fell 16 paise per litre for the first time in three months, while petrol prices increased 28 paise per litre.

At Indian Oil Corp. Ltd outlets in Delhi, petrol and diesel were selling for 102.19 per litre and 89.72 per litre, respectively.

Petrol prices have jumped 39 times since the results of the assembly elections in West Bengal, Assam, Kerala, Tamil Nadu, and Puducherry were declared on May 2.

According to data from the Petroleum Planning and Analysis Cell, the Indian basket of crude oil prices fell to $19.90 in April last year after the coronavirus outbreak, before rising to $71.98 a barrel in June.

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