Petrol, Diesel Prices Hiked In 3 States To Increase Tax Revenue

Cess on fuel was increased in the Nagaland on Thursday by Rs 6 per litre on petrol and Rs 5 per litre on diesel, with immediate effect, as a measure to recover lost amid the COVID-19 lockdown.

The announcement comes after Assam and Meghalaya announced similar measures to hike tax revenue from fuel sold it their states.

Petrol and diesel do not fall under the ambit of GST (goods and service taxes), allowing states and local governments to impose taxes at different rates apart from those charged by the central government.

Last week, Assam announced that the VAT (Value Added Tax) for diesel would be fixed at 23.66 paise in the rupee or Rs 17.45 per litre, whichever is higher, and VAT for petrol and other motor spirits at 32.66 paise in the rupee or Rs 22.63 per lire, whichever is higher. These changes came into effect on the midnight of 22 April after the Assam government predicted a 50 percent revenue loss due to a decline in international oil prices.

Assam said that it receives royalties for oil from ONGC and Oil India Limited and the state government expects that revenue to fall from an average of Rs 166 crore per month earlier to as much as Rs 50 crore per month. The state said that this was a temporary measure and there would be roll-back after the coronavirus crisis ends.

Meghalaya increased surcharge on sales tax last week that raised price of petrol in the state from Rs 68 to Rs 72 per litre, and the price of diesel from Rs 61 to Rs 66/litre.

International oil prices have seen a massive correction of at least 60 percent amid the pandemic, due to lockdowns imposed in every major economy in the world. However, petrol and diesel prices in India, which are revised on a daily basis, have remained unchanged from 14 March despite the decline in crude oil rate.

According to a Hindustan Times report citing official sources, the significant drop in prices in the global oil market gives the government an opportunity to increase excise duty on petrol and diesel by Rs 3-5 per litre without impacting their retail prices at fuel stations. The report further said that this could provide the government with an estimated additional revenue between Rs 45,000-75,000 crore during 2020-21 at a time when its expenditure is set to rise to revive the country's economy impacted by the lockdown.