Consumers pay more than 100% tax – central and state levies combined – on petrol and diesel.
New Delhi: Fuel prices in India are at a three-year high, although global crude rates halved over the same period, leaving many in the country to wonder why they must continue to pay more for petrol and diesel.
The central government says that because states earn more in taxes on petrol and diesel, they should cut fuel prices. The ruling BJP even sent out tweets with a breakup of the levies on petrol in Delhi, showing that the state earned almost double of what the Centre did from fuel prices.
A closer look, however, shows that this is not true.
For example, the price breakup of petrol in Delhi and the share of taxes between the Centre and states look like this:
— Cost of per barrel of petrol and freight charges (as on 14 Sept): $65.48/bbl
— Average exchange rate: $/Rs64.08
— Price paid by oil companies to refineries: Rs 26.65/Ltr
— Price charged to dealers (by oil companies): Rs 30.70/Ltr
Add to this:
• Excise Duty: Rs 21.48/Ltr
• Dealer Commission: Rs 3.24/Ltr
• VAT (including VAT on dealer commission) applicable for Delhi @ 27%: Rs 14.96/Ltr
Retail Selling Price in Delhi – Rs 70.39/Ltr
Now, let’s take a look at the share of the Centre and the state of Delhi in the levies on petrol.
The excise duty of Rs. 21.48 goes to the Centre. States get the proceeds from VAT and cesses. In the case of Delhi (which does not charge any cess), it amounts to Rs 14.96.
In addition to VAT, Delhi would also get 42% of the basic excise duty from the Centre as part of a formula on sharing of taxes between the Centre and states under the 14th finance commission.
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