As fuel price hikes singe common man's pocket, where is the money going and why?

The Rs 10-13 per litre increase in central excise imposed last year, will increase the taxable value of fuel for levy of sales tax (which accounts for 10 percent of state revenues). A CRISIL Ratings study of 10 states that account for 70 per cent of aggregate gross state domestic product indicates the buoyancy in state tax collections this year.

Most of these 10 states had hiked sales tax on fuel sales by 6-7 per cent (Rs 1.5-1.8 per litre) last fiscal. Consequently, the ratings agency expects sales tax revenue for states to increase 30 per cent this fiscal from fiscal 20 levels, even as fuel volume remains 2-3 percent lower than the pre-pandemic levels. The price of crude oil is seen hovering at $70 per barrel on average this fiscal.

Today the oil marketing companies (OMCs) raised the price of petrol by 26 paise per litre to Rs 97.76 a litre in Delhi but kept diesel price hike relatively lower at just 7 paise per litre that has raised its retail level at Rs 88.30 a litre in the national capital.

Justifying the taxes levied on petrol and diesel, the Union petroleum minister said that the Centre and the states are doing various developmental works in the wake of the Covid-19 pandemic, for which they collect taxes.