price shock' OMCs impacted
government on Tuesday night raised the excise duty on
petrol and diesel by Rs. 10 per liter and Rs. 13 per liter respectively in
order to mobilise the revenue collections during
the time when the global crude oil prices are significantly low. With this
hike, the excise duty on petrol is Rs. 32.98 per liter and on diesel is Rs.
31.83 per liter.
Spike in Petrol and Diesel Prices
The government has been raising the excise duty on petrol and
diesel several times in the past in order to take advantage of the lower oil
prices. In fact, this is the second hike in a little over a month. The government has earlier raised the duty of Rs.
3 per liter on petrol and diesel on March 14.
government is trying to compensate for the lower demand of fuels owing to the
coronavirus crisis and ongoing lockdown with the higher tax rates. Besides, the
sharp decline in the prices of crude oil has opened unexpected sources of
revenue for the government which was struggling to find resources during the
price hike in March, the government expected to yield Rs. 39,000 crore
additional annual revenue. While with this hike, it is expected to yield Rs.
1.5 lakh crore. It would roughly contribute to 0.67% of GDP on an annual basis.
Impact of Duty Increase
hike would not affect the consumers as it will be borne by the Oil Marketing
Companies like BPCL, HPCL, Indian Oil, etc. The rise in excise duty will be
adjusted against the marketing margins of these companies. This means there
will be no increase in retail prices of fuel for the consumers. However, with
this adjustment, the marketing margins of the oil companies will see a share
because of this reason that the stocks of BPCL, HPCL and Indian Oil saw a 3% to
5% fall in today’s market even when the BSE Sensex was 1% up.
Taxes at State Level
Apart from the central government’s excise duty hike, several
states and union territories including Haryana, Delhi, Punjab and Assam have
also increased the state taxes on fuel. For instance, Karnataka has increased
Value Added Tax (VAT) on petrol and diesel by 3 percentage points with effect
from April 1. Tamil Nadu increased its VAT by Rs. 2.5-3.25 per liter on
petrol and diesel. Delhi also increased its VAT on petrol and diesel by 3
percentage points and 13.25 percentage points respectively. Likewise, Nagaland
has levied Rs. 5-6 per liter additional tax on petrol and diesel with effect
from April end.
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