Petrol, Diesel Rates Cuts From Sliding Crude Oil Price Are Being Offset By Taxes

On Monday, state-owned oil marketing companies lowered the fuel rates further on extended fall in oil prices on concerns over fall in demand due to mounting economic disruptions from the spread of coronavirus. However, a recent increase in central government taxes has curbed gains.

Petrol prices per litre were cut by around 16 paise to Rs 69.59 in New Delhi, Rs 72.29 in Kolkata, Rs 75.30 in Mumbai and Rs 72.28 in Chennai.

Diesel prices per litre were reduced by around 14 paise to Rs 62.29 in New Delhi, Rs 64.62 in Kolkata, Rs 65.21 in Mumbai and Rs 65.71 in Chennai.

International crude oil prices

In the international markets, an emergency rut cut by the US Federal Reserve failed to soothe the concerns of the global financial markets of the economic effects of coronavirus spread. More lock-downs were announced by governments around the world by cancelling flights and disallowing large gathering to encourage people to stay indoors to contain the spread of infection. Businesses like restuarants, malls, theatres were asked to be closed.

Benchmark Brent Crude fell close to $2 to $32.02 a barrel on Monday, an extension to its 20 percent fall witnessed last week.

Oil prices have been under immense pressure for over a week not only due to a decline in demand amid the pandemic but also from an oversupply from the top exporter, Saudi Arabia, after the Kingdom slashed its prices and raised output to push sales in Asia and Europe.

Increase in excise duty

The Indian government's recent announcement to hike excise duty on petrol and diesel by Rs 3 per litre may have been offset by fall in international crude oil prices for the time being.

On Saturday, the Central Board of Indirect Taxes & Customs raised special excise duty on petrol by Rs 2 to Rs 8 per litre and to Rs 4 a litre from Rs 2 in case of diesel. Additionally, road cess was raised by Re 1 per litre each on petrol and diesel to Rs 10.

With this, the total incidence of excise duty on petrol has risen to Rs 22.98 per litre and that on diesel to Rs 18.83. This is in addition to the state government and other local taxes that Indian consumers pay for fuel.

It may be noted that in 2014, central government tax on petrol was Rs 9.48 per litre and that on diesel was Rs 3.56 a litre.

Fuel prices in India are revised every day based on international oil rates and foreign exchange rate of the rupee.