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Petrol/Diesel Prices: Who is Responsible for Back-breaking Hikes? -Subodh Varma

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The central government has raked in over Rs18 lakh crore from excise duties compared to Rs14 lakh crore from taxes by all state governments over the past eight years.

Yet again, the government has tried to obfuscate the exorbitant petrol/diesel prices by blaming state governments. This time, it was the Prime Minister himself who blamed some Opposition-ruled states for not reducing taxes like the Value Added Tax (VAT) after the central government had marginally reduced the central excise duty last November. 

The average per litre price of petrol in four metros (Delhi, Mumbai, Kolkata, Chennai) was Rs112.97, and a similar average price for diesel was Rs100.55 on April 29, 2022, as per data put out by the Petroleum Planning & Analysis Cell (PPAC) of the Ministry of Petroleum & Natural Gas. Petrol prices have risen by over 62% and diesel prices by 76% since June 2017. These high prices have had a cascading effect on diverse commodity prices, including essential food items, because these fuels are used extensively in farming and transporting commodities. It may be recalled that sky-high prices have been causing massive discontent in the country.

What Prime Minister Narendra Modi was doing was to try and blunt the criticism of his government for maintaining such high prices, and thus, causing a rise in prices of all essential items of consumption. The central government taxes the oil marketing companies that provide petrol and diesel after buying it from refineries, which convert the imported crude oil into petrol, diesel and a slew of other petroleum-based products. The main tax that is levied is excise duty. The state governments levy VAT or sales tax on these fuels. How do these two streams of taxation compare? Who taxes more? Let us have a look.

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Please click here to access the PRS blog 'Petrol and Diesel Prices' by Shashank Srivastava, published on October 21, 2021.