As petrol and diesel prices rise for the fourth straight day, Moneycontrol's Gaurav Choudhury explains how a disproportionately high amount of tax revenues comes from just one set of products, both for the Centre and the states
Petrol prices were raised by 40 paise per litre and diesel by 45 paise, for the fourth consecutive day after oil PSUs ended an 82-day hiatus in rate revision. Petrol price in Delhi rose to Rs 73.40 per litre from Rs 73, while diesel price increased to Rs 71.62 a litre from Rs 71.17, according to a price notification of state oil marketing companies.
Brent crude oil rates have almost doubled in about a month's time and are now trading above $40 a barrel mark amid optimism that easing of lockdown restrictions will increase fuel demand. Many states have also increased the value-added tax (VAT) to raise revenues to shore up their own revenues. Successive governments, both at the Centre and states, have used petroleum products as milch cows.
In 2018-19, the Centre earned Rs 2.14 lakh crore from central excise duty on petroleum products, which is about 10 percent of the Centre’s total gross tax revenues of Rs 21.63 lakh crore earned during the year.
Likewise, states earn significant revenues from taxing petroleum products. This is particularly true for the richer or the so-called industrialised states such as Karnataka and Maharashtra. The pattern is more or less similar across most states.In this edition of Business Insight, Moneycontrol's Gaurav Choudhury explains how a disproportionately high amount of tax revenues is coming from just one set of products, both for the Centre and the states.