Economists at SBI said on Thursday that petrol price can go down to Rs 75 a litre across the country if brought under the ambit of the Goods and Services Tax (GST), but there is a lack of political will which is keeping these fuel product prices at one of the highest in the world.
According to the calculation performed by these economists, diesel will come at Rs 68 a litre and the revenue loss for the centre and states will be only Rs 1 lakh crore or 0.4% of GDP. The calculation was made under the assumption of global crude prices at USD 60 a barrel and exchange rate at Rs 73 per dollar, which is close to the current rates.
Fuel rates across Indian cities are currently at all-time highs. These rates are revised on a daily basis based on These rates are revised on a daily basis by oil marketing companies in line with changes in the international prices and the rupee's exchange rate. Oil prices have been on a rise since January on optimism in the global economy after progress in the US stimulus package and on hopes for improving fuel demand as vaccines are rolled out.
The surge in oil prices and high central, as well as state taxes, have pushed the price of petrol in certain regions past Rs 100 per litre. Petrol in Madhya Pradesh petrol is currently priced at Rs 100.14 per litre.
The SBI economists said bringing petrol and diesel under the goods and services tax is an unfinished agenda of the GST framework and getting the prices under the new indirect taxes framework can help.
"Centre and states are loathing to bring crude oil products under the GST regime as sales tax/VAT (value added tax) on petroleum products is a major source of own tax revenue for them. Thus, there is lack of political will to bring crude under the ambit of GST," they said.
At present, states choose to levy a combination of ad valorem tax, cess, extra VAT/surcharge based on their needs and these taxes are imposed after taking into account the crude price, the transportation charge, the dealer commission and the flat excise duty imposed by the Centre, they explained.
Assuming for the crude prices and dollar rate, transportation charges at Rs 7.25 for diesel and Rs 3.82 for petrol, dealer commission of Rs 2.53 for diesel and Rs 3.67 for petrol, cess of Rs 30 for petrol and Rs 20 for diesel which will be divided equally between the Centre and states, and GST rate at 28%, the economists came at the final price estimates.
Growth in the consumption - diesel going up 15% and petrol by 10% - has been used to assess the Rs 1 lakh crore fiscal impact of getting petroleum prices under GST, it said.
An increase of $1 in the crude oil prices will push up the petrol price by around 50 paise and diesel prices by around Rs 1.50, and bring down the overall deviation by around Rs 1,500 crore under the baseline scenario, it said.
With inputs from PTI