Here’s why petrol price relief is possible and painless

TOI

New Delhi, 22 May 2018: For diesel and petrol, it’s a record a day every day now. On Saturday, petrol touched the all-time high price since 2013. On Sunday, it beat its previous day’s record. On Monday, it created a new all-time record in Delhi and Mumbai +by touching Rs 76.57 and Rs 84.40, respectively.

 

WHY ARE GLOBAL CRUDE OIL PRICES ON A RISE?

Production cuts by oil exporters, shrinking supplies from Venezuela and uncertainty over Iran’s contribution after U.S. decision to exit the nuclear deal have contributed to rise in crude prices.

 

However, there is a catch. The government might be blaming crude prices for record high petrol and diesel rates, but the last time petrol crossed 76 per litre, five years ago, it was 40 per cent costlier before taxes.

 

Fuel prices have shot up now because of very high taxes. Central tax on diesel has increased more than three-fold, and it has doubled in case of petrol. In 2016-17, the Centre earned 2.7 lakh crore from taxes and duties on petroleum products, which is 117 per cent higher than the 1.3 lakh crore it earned in 2014-15, when NDA came to power.

WHAT ABOUT TAXES?

Taxes account for half of the price we pay for petrol and diesel. Here is a break up of taxes imposed on fuel:

 

Oil minister Dharmendra Pradhan has indicated that there is scope for relief. On Sunday he said, "The Centre is sensitive towards the rising fuel prices. Various alternatives are being explored. I hope something will work out soon."

WHAT IS THE BOTTOMLINE?

Most fuel taxes are as percentage of price which means government’s tax earning goes up as price increases. The central government raised excise duty nine times between November 2014 and January 2016 while it cut the tax just once in October last year.

 

The bottomline thus is, Centre does not have to take a hit on revenue, it just has to be okay with not earning more with every hike. If not, then the next relief may be six months away when the next round of elections is due.