A heavy load of multiple taxes keeps petrol and diesel prices at an all-time high

Taxes and duties now account for 62.5 percent of the retail price of petrol and 57.77 per cent of the retail price of diesel in the capital at current level of pump prices. The taxes component has fallen over the fortnight as the global price of petrol and diesel has also risen in the past few days. Otherwise taxes were well over 70 per cent of the retail price of petrol till the start of the month.

What the higher level of taxes means is that the bulk of the retail price a common man pays to get fuel is tax and if the government would not have targeted petrol and diesel to raise revenue every time there is a pressing need for it, the fuel prices in India today would have mirrored retail prices prevailing decades ago (in 2003) and closer to what consumers in oil-rich countries in the Gulf pay.

The current state tax (VAT) rate on petrol and diesel has risen to Rs 19.32 and Rs 10.85 per litre, respectively, in Delhi. Similarly, the Centre's decision in May to raise excise duties on petrol and diesel by Rs 10 and Rs 13 per litre, respectively, had taken up the component of this tax on retail prices by Rs 32.98 on petrol and Rs 31.83 per litre on diesel. So the total tax component (central and state in Delhi) is Rs 52.30 a litre on petrol and Rs 42.68 on diesel. Compare this with the base price of the two products today and the tax load becomes clearly visible. The base price of petrol currently is a mere Rs 27.37 a litre and diesel is just Rs 28.32 a litre.

"Auto fuels comprise 20-30 percent of revenue of state governments while it forms a significant portion of excise revenue for states. As the fuel is still out of GST raising duties are easier for both the Centre and states that target the product to raise revenue whenever there is an emergency. But a high set price of fuel also adds inflationary pressure on the economy that would just not be right at this juncture when the country is fighting the coronavirus outbreak," said an oil sector analyst not willing to be named.