Earlier this week, the central government raised excise duty on petrol and diesel by Rs 10-13 per litre, however, it directed state-run oil marketing companies to not increase retail selling prices and chose to offset it against the sharp decline in crude oil prices seen after the coronavirus outbreak.
However, despite the directive, retail prices paid at the fuel stations by consumers has increased in as many as 16 states across India during the lockdown period that started on 25 March.
This is because state governments have also resorted to increasing taxes at the local level on petrol and diesel to make for the losses in revenue due to the COVID-19 pandemic that has paused economic activity.
There has been an increase in fuel prices across major Indian cities like New Delhi, Mumbai, Pune, Bengaluru, Gurgaon and Chandigarh, as the respective state governments imposed VAT hikes.
So far, 16 states have raised taxes in some form on fuel: Delhi, Maharashtra, Karnataka, Tamil Nadu, Uttar Pradesh, Punjab, West Bengal, Tripura, Goa, Rajasthan, Meghalaya, Assam, Nagaland, Arunachal Pradesh, Uttarakhand and Haryana. The union territory of Chandigarh has also hiked VAT.
The break-up of petrol and diesel price shows that taxes like excise duties, customs duty and VAT make for 70 percent of the final price paid by consumers at fuel stations.
Oil marketing companies (OMCs) have not changed their base price for fuels since 16 March even as the international benchmark for crude oil - Brent crude- fell as much as 60 percent in 2020, down to a two-decade low level, over concerns of sharp fall in demand due to lockdowns in several countries.
In Delhi, where the number of confirmed cases of COVID-19 infections is edging closer to 5,000, the government hiked the price of diesel by a steep Rs 7.10 per litre and that of petrol by Rs 1.67 a litre last week.
The Haryana government also hiked VAT on the sale of diesel and petrol with an increase of Re 1.1 and Re 1 per litre, respectively. Tamil Nadu government's VAT hike raise prices by Rs 3.25 per litre on petrol and Rs 2.50 for diesel. In Uttar Pradesh, petrol per litre costs Rs 2 more and diesel price was up by Re 1.
Uttarakhand government increased the price of petrol and diesel by Re 1 and Rs 2, respectively, per litre by imposing healthcare tax.
Nagaland increased cess on fuel by Rs 6 per litre on petrol and Rs 5 per litre on diesel.
Maharashtra, Karnataka and West Bengal had hiked VAT from 1 April as part of their state budget decision passed earlier.
Assam government said that the increase in VAT it announced for the state was temporary and was made to recover the over 50 percent revenue loss that it predicts to make due to a decline in international oil prices. The state government said it receives an average of Rs 166 crore per month as royalties for oil from ONGC and Oil India Limited, which are estimated to fall to Rs 50 crore.
OMCs' revenues are expected to decline as the central government's increase in excise duty while keeping base rates unchanged will leave less room for their profits.