Govt rules out tax rollback as fuel prices rise, blames hurricanes for spike

Oil minister Dharmendra Pradhan also said the decision on reducing the cess on petroleum products rests with the finance ministry.

The government said on Wednesday it will not step in to adjust prices of petrol and diesel, which are at its highest in three years, and blamed a spike in international crude oil prices for the increase.

Vehicles on a road in front of a petrol pump at MG Road near IFFCO Chowk, Gurgaon, India.(Sanjeev Verma/HT File PHOTO)

The price of petrol in Delhi, for instance, has increased by Rs 4.90 a litre in the last two months, triggering criticism from consumers and the opposition.

“It is not in the good interest of the general public for the government to intervene in the day-to-day business of oil marketing companies,” oil minister Dharmendra Pradhan said after a meeting with the heads of state-run refiners on Wednesday.

Petrol cost Rs 70.38 a litre on September 13, up from Rs. 65.48 a litre on June 16 when the government introduced the system of revising fuel prices daily in sync with international oil markets. Prior to June 16, fuel prices were revised every fortnight to reflect international prices and exchange rates of the two weeks gone by.

The last time people in Delhi paid around Rs 70 a litre for petrol was in September 2014. But at that time, crude oil cost $96 a barrel (on September 15, 2014), nearly double of the $53 it did on September 13.

“Crude prices are seeing the impact of hurricanes Harvey and Irma, this has caused a 13% decline in global refining capacity...This has caused international crude prices to increase; petrol has increased 18% and diesel prices have increased 20% in global markets,” said Pradhan.

He said he was optimistic of global prices cooling in the coming days.

The price break-up for every litre of petrol in Delhi shows that state-run companies charge dealers Rs 30.70. The remaining is in excise duty, dealers’ commission and state VAT which takes the price to Rs 70.38.

India’s crude oil basket was at $53 per barrel on September 13, compared to $46 a barrel on June 16.

The fall in crude oil prices since 2014 has been offset by an increase in taxes, particularly the central excise duty that was raised 9 times between November 2014 and January 2016. The corresponding tax mop up went from Rs 99,000 crore in 2014-15 to Rs 2,42,000 crore in 2016-17. Additionally, VAT, a component levied by state governments, has also been increased in some regions.

Deflecting calls for a rollback on such duties, Pradhan said the revenue is used for financing social and infrastructure projects.

He left the decision on taxes to the finance ministry.

India imports 80% of its oil need, raking up a hefty import bill, but sliding crude prices have trimmed it as well as the current account deficit.