High taxes on fuel continue to keep the prices high

Sruthi Vibhavari

Hyderabad: As of today, the petrol price in Telangana stands at Rs. 83.47 per liter while diesel stands at Rs. 79.14 per liter. Despite the global slump in crude oil rates, the fuel prices all over the country are at a five-month high. This can be attributed to taxes being levied.

In May, as a principal revenue-generating model, the central government increased excise duty on petrol and diesel by Rs. 10 and Rs. 13 respectively. Due to this, the excise duty on both petrol and diesel are now slightly above 69 per cent. This rate is currently the highest in the world.

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This has lead to diesel becoming more expensive than petrol in the country’s capital and several other states.

Meanwhile, as many as 13 states announced a hike in their value-added tax (VAT) on auto-fuels.

Telangana collects the highest VAT on petrol at 35.2 per cent and on diesel at 27 per cent, which includes an eight per cent entry tax. The government is yet to abolish the entry tax and transfer the benefits to the consumers as mandated under the GST law bought into effect in June 2017.

After the lockdown imposed in late March, the consumption of auto fuels fell sharply in the following months of April and May.  The tax burden only affected the customers as fuel consumption increased in June.

Now, the consumers must brace for another hike in fuel prices as the prices of crude oil are picking up albeit slowly. Oil marketing companies did resume the daily revision of fuel prices.

However, the tax-induced hike in petroleum prices might not result in high inflation. In its May Monetary Policy Committee meeting, the Reserve Bank of India stated that due to the meltdown in the demand and the need for a significant easing of price pressures on core goods and services.

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