On Wednesday, the price hike in the petrol and diesel were at pause but after 12 consecutive days of surge since 9th February 2021, the hike came into to operation. The petrol prices in Mumbai was ₹97 while in Delhi, its just 7 rupee away from ₹91 per litre.
As per the new rules prices of petrol and diesel are to be revised on a daily basis aligning them with the benchmark International price of crude oil and the foreign exchange rates. One of the major reasons for the hike in petrol and diesel prices is being referred to the surge in the prices of crude oil in the international market.
Another reason behind the price hike is the imposed cess and VAT by the central and the state government and in the budget 2021 imposition of new agricultural and infrastructural cess was announced by Finance Minister, Nirmala Sitharaman, which resulted in a burden for the transport holders.
The Simplified Tax Structure
The tax structure on petrol and diesel made up by the central government makes up for ₹32.98 with the sales tax or VAT of ₹19.55 and for the diesel prices excise duty ads up to ₹31.83 and VAT to ₹10.99 in Delhi. A dealer commission of ₹2.6 per litre on petrol and ₹2 per litre on diesel is also included as the price of auto fuels.
In 2021, the prices in diesel and petrol have increased by more than ₹ 7 per litre which is a result of the increased prices of both the auto fuels in recent days since the announcement of the Budget 2021.
For growth and development of the country, mobility plays a major role and the movement was for the sake of growth and not luxury but the recent hike has resulted in a halt of the growth of the country.
India is a country with major population and hence the mobility, but the increased prices, introduction of new Cess and other charges might result in the loss of country’s growth achievements.
Can Relief Be Granted To The Motorists?
If we’re talking about the increased prices, the approximate contribution of State and Central taxes are 60% and 54% to petrol and diesel.
If the Cess is reduced by a bit, the motorists might enjoy some relief because since the lockdown the Indian economy has fell down drastically.
What Are Other Reasons For Increased Prices?
The government has not just refused a reduction in excise duty but has also cumulatively increased the excise duty on petrol and diesel for ₹13 and ₹16 respectively.
But state government, of few states, have decided to cut down the taxes, example West Bengal where the tax is reduced by ₹1 on both the auto fuels.
A rage has taken over and several protests have taken place in different areas demanding for a reduction in prices. Opposition parties have also raised questions on the whooping increase in prices of auto fuels.
According to the Union Petroleum Minister, Dharmendra Pradhan, the hike in prices is due to decreased production of crude oil during Covid-19 situation and hence resulted in the increased international crude oil value.
The increase in the international prices resulted in the increased prices in India. According to him the rates will gradually soften.
Impact On GDP Due To Increasing Fuel Prices
Spike of 10% in the oil prices might result in the increase in retail inflation by 0.23%, according to World Street Brokerage Bank of America Securities.
The spike in the oil prices will affect the daily lives of Indian citizens and impacting the consumption of the auto fuels as well.
According to the same study, $10 Hike per barrel of the crude oil will result in reduction of the consumption by 0.4 % of GDP and therefore the oil tax cut to reduce prices by ₹10 per litre will impact the fiscal deficit by only 0.6 % of GDP.
According to the same study it states that if the prices of crude oil continue to stay at a level of ₹60 per barrel on the customs duty on crude oil should be decreased by the government and the reduction in customs duty will not impact the revenue at a greater level for the governments.
Petroleum and natural gases under GST ambit will result in a uniform rate throughout India while bringing the auto fuel prices down because taxes, both state and Central, imposed on auto fuels be abolished making a one way tax structure throughout the country.
A hint has been dropped down by PM Narendra Modi and Nirmala Sitharaman, Finance Minister, to bring the fuel and natural gas under the GST ambit after a statement by PM Modi which said that they are committed to bring natural gas under GST regime and that he wanted to inform everyone that they should make an investment in India’s energy sector.