An Agriculture Infrastructure and Development Cess (AIDC) of Rs 2.5 per litre on petrol and Rs 4 per litre on diesel has been proposed in the budget. (Representative Image)
Four states have cut taxes on petrol and diesel in recent days to rein in soaring prices, giving some relief to consumers who are feeling the pinch of a sharp rise in global rates and the high level of taxation.
State taxes have been cut in West Bengal, Assam, Rajasthan and Meghalaya but even after the reduction, diesel in Delhi is cheaper than in three of these states, while petrol in the capital is lower than two of them.
Poll-bound West Bengal cut the value-added tax on petrol and diesel by Re 1 per litre on February 21. Among the four states, Meghalaya has announced the biggest cut of Rs 7.40 a litre on petrol and Rs 7.10 on diesel.
Assam, which also has elections this year, withdrew the additional tax of Rs 5 a litre imposed to fund its fight against the COVID-19 pandemic. Rajasthan was the first state to go for a VAT cut— from 38 percent to 36 percent on January 29.
After the tax cut, petrol was priced at Rs 91.78 in Kolkata, Rs 86.87 in Shillong, Rs 87.24 in Guwahati and Rs 97.10 in Jaipur on February 22. Diesel retails for Rs 84.56 in Kolkata, Rs 80.24 in Shillong, Rs 81.49 in Guwahati and Rs 89.44 in Jaipur.
In Delhi, a litre of petrol price was priced at Rs 90.58 and diesel at Rs 80.97. In February alone, petrol has gone up by Rs 4.28 and diesel by Rs 4.49.
Crude oil prices have risen more than 60% since early November, buoyed by hopes of economic recovery because of vaccines against the virus, US President Biden’s plans for a $1.9 trillion stimulus that is expected to raise demand, supply squeeze by the oil cartel OPEC and the disruption caused by freezing weather in the U.S.
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Fuel prices, with which Indian rates are linked, have followed a similar trajectory. However, when global oil prices crashed last year because of the pandemic, the government raised taxes instead of cutting retail rates. A litre of petrol and diesel costs about Rs31-Rs33, while the rest of it is central and state taxes.
Finance minister Nirmala Sitharaman had termed the price hike as a vexatious issue and a "dharma sankat" for the government. However, the Centre was reluctant to cut the excise duty fuel as its other sources of revenue have diminished in the economic downturn triggered by the pandemic.
In the current financial year, taxes on petrol and diesel were raised by Rs 13 and Rs 16, respectively, in the form of special additional excise along with the road and infrastructure cess. The finance minister sought co-operation from the state governments to bring the fuel price back to a reasonable level.