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Resource centre on India's rural distress
 
 

Overtaxation of petrol and diesel cannot be justified

-The New Indian Express

Which means sometime last year, when crude was averaging $25 a barrel, petrol should have sold for Rs 50 a litre.

Nearly two-and-a-half years ago, when global crude oil prices were around $75 a barrel, petrol was selling at Indian pumps for Rs 75 a litre. Today, when crude oil prices have fallen to $52 a barrel, petrol prices have hit an all-time high of Rs 86 or thereabouts a litre. The logic of such an otherwise inexcusable anomaly is of course the government’s need to raise revenues in difficult times by taxing a commodity that no individual or enterprise can really do without.

Some 67% of the retail price of petrol and 61% of that of diesel go towards taxes as of today. For the last five years, the Centre has used the fall in crude prices to raise taxes and effectively keep the retail prices of petrol and diesel within a narrow range. If the fall in crude prices had been passed on to consumers, the pump prices would have fallen by 50 paise for every $1 drop in crude rates. Which means sometime last year, when crude was averaging $25 a barrel, petrol should have sold for Rs 50 a litre.

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