In a surprising development, nationwide fuel prices were increased by 60 paise per litre on Monday following the similar hike on Sunday. The decision to hike the fuel prices after nearly two and a half months was taken by state-run oil marketing companies. The last hike was done on March 16 and now we have state-owned oil firms doing a daily revision of fuel prices. After the new hike, petrol will now cost Rs 72.46 per litre as against Rs 71.86 on Sunday, while diesel price increases to Rs 70.59 per litre from Rs 69.99, as per the price notification of state oil marketing companies.
Petrol and diesel prices were last hiked on March 16 under the dynamic pricing policy but the Union Government did increase the excise duty in May. The excise duty was hiked on petrol by Rs 10 and Diesel by Rs 13 per litre to compensate for the revenue loss incurred due to the decline in the oil prices and consumption. COVID-19 pandemic and the tensions between Saudi Arabia and Russia can be attributed to the decline in oil prices thus affecting the revenue collection of the Indian government. Despite the hike on excise duty, the retail sale price of fuels remained unaffected. Then, the oil companies took the decision to adjust the excise hike against the reduction required due to the drop in international prices and thus the retail prices remained unaffected.
The nationwide shutdown and restrictions affected the revenue collection of the state governments. This forced many Indian states to increase VAT or impose cess on fuel to shore up the falling revenue. On May 30, Maharashtra announced additional cess of Rs 2 per litre on both petrol and diesel. As per the various media outlets, the state government was expecting an increase of Rs 3,000 crore revenues in the current financial year due to the hike.
It wasn’t just Maharashtra that increased the VAT as the newly bifurcated Union Territory of Jammu and Kashmir did the same by increasing the taxes of Rs 2 per litre and diesel by Re 1 per litre on May 29. Many others to join the bandwagon later were Delhi, Himachal Pradesh, Jharkhand, Punjab who increased the taxes to generate additional revenues.
After a stunning fall in fuel demand in April, we are seeing the demand for fuel rising sharply in May. According to various reports, sales of petrol and diesel by state-run fuel retailers fell by 28 per cent and 47.5 per cent, respectively, in the first two weeks of May. If we compare to the data of April, the sale of petrol and diesel had reduced by 56.5 per cent and 61 per cent respectively in April.
Image Source: PTI