Taxes account for two-third of retail price of petrol-diesel, biggest chunk goes to Centre

This article written by Krishnanand Tripathi throws light on the rising price of petrol and diesel at a time when crude prices are at a low of $40-43 a barrel for Indian basket. He further tells that the biggest chunk of nearly 42% of the retail price of petrol in Delhi goes to the Centre’s kitty as taxes while Delhi government gets 23% of the retail price of petrol as VAT.

Hyderabad: A steady rise in the retail price of petrol and diesel this month has left people fuming primarily due to two reasons.

First, the steep rise comes at a time when crude prices are at a low of $40-43 a barrel for Indian basket.

Secondly, the oil marketing companies have been increasing the retail prices on a daily basis when the Covid-19 pandemic has caused unprecedented loss to people’s income and businesses due to lockdown measures.

A back of the envelope calculation of petrol price in national capital Delhi shows that the taxes and duties levied by the Union and state government account for two-third of the retail price of petrol and diesel.

The biggest chunk of nearly 42% of the retail price of petrol in Delhi goes to the Centre’s kitty as taxes while Delhi government gets 23% of the retail price of petrol as VAT.

“The government does not interfere with the prices set by the oil marketing companies. Retail prices of petrol and diesel are fixed by the companies and the government has no role in it,” a senior official told ETV Bharat.

After a gap of over 80 days, oil marketing companies such as Indian Oil, BPCL and HPCL, started raising prices early this month. The retail price of petrol in Delhi has gone up by Rs 8.7 per litre since June 7, while diesel has become costlier by Rs 10.63 per litre in the last 19 days.

Also, this is for the first time when the price of diesel has surpassed the price of petrol in national capital on Wednesday.

The next day, the price of diesel in the national capital crossed the mark of Rs 80 a litre (Rs 80.02) while the price of petrol was a tad lower at Rs 79.92 per litre.

The officer cited above says oil marketing companies have been raising the retail prices to cover the inventory losses suffered by them in recent times.

He said oil marketing companies suffered losses in recent times as they bought crude at a higher price but later crude prices crashed in the international market by the time it was delivered in the country.

“Oil marketing companies set the retail price on the basis of average price of crude oil in the last 10 days therefore they suffered losses as the price of crude was higher when they had booked it,” he said.

The officer, who declined to be named, attributed the recent hike carried out by the oil marketing companies to recover these losses suffered by them.

According to the latest price build up information available on the website of Indian Oil, the base price of diesel in Delhi on June 16 was Rs 22.93 per litre, freight etc accounted for 30 paise a litre. The dealer price, excluding excise duty and VAT, was Rs 23.23 per litre.

The Union government's excise duty accounted for the biggest chunk of retail price of diesel at Rs 31.83 a litre, dealer commission Rs 2.53 per litre and the VAT imposed by Delhi government, that also includes VAT on the dealer commission, was Rs 17.60 per litre.

A back of envelope calculation shows that taxes and dealer margin accounted for over 69% of the retail price of diesel in Delhi on June 16.

The Central and State taxes alone accounted for nearly two-third (66%) of the retail price.

While the Central tax (excise duty) accounted for 42% of the total retail prices of diesel in Delhi, the VAT levied by Delhi government accounted for 23.4% of the retail price.

The basic calculation shows that nearly two-third of petrol and diesel price paid by a consumer goes to the Centre and state government as revenue, with the Centre being the biggest beneficiary.