India now has highest taxes on fuel

Tribune News Service

New Delhi, May 6

The Centre’s decision to retain the gains from the decline in international oil prices has pitched India as the country with the highest taxes on fuel.

The steepest-ever hike in excise duty — Rs 13 per litre on diesel and Rs 10 per litre on petrol — means that taxes now account for over 69 per cent of the pump price, which is higher than that imposed by industrialised countries.

Italy tops with taxes constituting 64 per cent of the fuel price while France is a close second with taxes at 63 per cent of the retail price of fuel. In Britain the taxed percentage is also high at 62 per cent while it is 53 per cent in Spain and nearly half the price in Japan.

Petrol and alcohol have traditionally been major income earners for governments. The latest round of hikes are expected to earn the government Rs 1.6 lakh crore in additional income, which is almost the same as the sole social support package announced by the Modi government.

Also read: Govt to gain Rs 1.6 lakh cr this fiscal from record excise duty hike on petrol, diesel

If Rs 31,000 crore is deducted from the package announced in March by Union Finance Minister Nirmala Sitharaman, since the amount vests with the states, the extra income from hike in fuel prices exceeds the social support package, giving the Centre some fiscal space.

After the Modi government took power in 2014, it has tended to retain some of the fall in international crude prices. As a result the excise on petrol has gone up from Rs 9.20 per litre in November 2014 to Rs 33 per litre on May 5, 2020, and on diesel from Rs 3.46 per litre to Rs 31.83.

Similarly, the VAT on basic price of petrol has gone up from 20 per cent in 2014 to 30 per cent in 2020, while the VAT on diesel has risen from 12.5 per cent to 30 per cent.