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As Petrol Prices, Diesel Prices Hit Unprecedented Levels, Government Aims At Long Term Solution

Government had raised excise duty nine times between November 2014 and January 2016
Government had raised excise duty nine times between November 2014 and January 2016

Petrol prices and diesel prices reached unprecedented levels as petrol prices almost hit Rs 85 in Mumbai and Rs 80 in Chennai on Wednesday. While there are calls for the reduction in excise duty so as to slash the petrol prices and diesel prices, the union law minister Ravi Shankar Prasad says that the government is looking forward to a long-term solution of the highly capricious situation instead of looking for the quick-fixes. "The government is keen that instead of having an ad hoc measure it may be desirable to have a long-term view which addresses not only the volatility but also takes care of the unnecessary ambiguity arising out of frequent ups and downs," said Ravi Shankar Prasad, union law minister said.

At the same time, the opposition has cornered the government on the rising fuel prices. Former Union finance minister P Chidambaram says that there is a scope of price reduction of Rs 25.

Also Read: Petrol Price Crosses Rs. 77 In Delhi, Near Rs. 85 In Mumbai; Diesel At New Highs

"Bonanza to central government is Rs 25 on every litre of petrol. This money rightfully belongs to the average consumer. Central government saves Rs 15 on every litre of petrol due to fall in crude oil prices. It also puts additional tax of Rs 10 on every litre of petrol," Chidambaram added.

The rising petrol prices and diesel prices are attributed to the spike of Brent crude prices in the global markets, while the rupee's continuous fall against the US dollar is making the fuel even more expensive in the domestic market. It is worth mentioning here that India imports nearly 80 per cent of its fuel consumption from abroad. The Indian rupee (INR) closed at Rs 68.42 against the US dollar on Wednesday in the currency markets.

It is noteworthy that the government had raised excise duty nine times between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre.

Also ReadRupee Falls To 18-Month Low Against US Dollar: 5 Points

The central government levies Rs 19.48 a litre of excise duty on petrol and Rs 15.33 per litre on diesel.

State sales tax or VAT varies from state to state. Unlike excise duty, VAT is ad valorem and results in higher revenues for the state when rates move up.

In Delhi, VAT on petrol was Rs 15.84 a litre, and Rs 9.68 on diesel in April. Today it is Rs 16.34 on petrol and Rs 10.02 a litre on diesel. Currently, petrol and diesel prices are revised on a daily basis, a practice adopted by oil marketing companies in June 2017. The prices are implemented at fuel cities at 6 am.