Ajit Dalvi
According to the details disclosed by the parliament on July 19, the central government levied a total of Rs 3,3489.4 billion from the consumption tax on gasoline and diesel in the 2021 fiscal year. Although the consumption tax on gasoline contributed Rs 1,015.98 crore, the contribution of diesel was more than twice that of Rs 2,3329.6 crore.
- In fiscal 2021, gasoline and diesel prices will increase 76 times and 73 times, respectively
- Compared with the 2020 fiscal year, the consumption tax collection rate has increased by nearly 88%
- The increase in consumption tax in fiscal 2021 is a factor in the increase in levy
Compared with the total petrol-diesel excise tax of Rs 178,311 crore in FY2020, Rs 3,348.894 crore in FY 2021 is an increase of 87.81% year-on-year. The increase in excise taxes—despite a significant reduction in vehicle use and fuel purchases in the first months of the last fiscal year due to the pandemic, and a series of prolonged lockdowns across the country—can be attributed to several fuel price increases.
| Consumption tax levied on the sale of petroleum products | ||||
| Fiscal year 2019 | 2020 fiscal year | Fiscal Year 2021 | Growth: FY2021 and FY2020 | |
| gasoline | 68,929 crore | Rs 66,279 crore | 1,01,598 crore | 53% |
| diesel engine | 1,14,471 crore | 1,12,032 crore | Rs 2,33,296 crore | 108% |
| Automatic transmission oil | Rs 2,450 crore | Rs 1,461 crore | 77.9 crore | -46% |
| natural gas | Rs 1,547 crore | Rs 1,573 crore | 1,195 crore | -twenty four% |
| Crude Oil Excise Tax | 17,814 rupees | 16,500 crore | 7,877 crore | -52% |
| All | 2,35,301 rupees | 1,97,845 crore | Rs 2,33,746 crore | 74% |
The increase in consumption tax is one of the factors that will increase the levy in fiscal 2021
One reason for the 88% year-on-year increase in consumption tax collection is the substantial increase in taxes on the two fuels in mid-March 2020. The excise tax per liter of gasoline was increased from 19.98 rupees (effective from July 6, 2019) to 22.98 rupees (from March 14, 2020), and then to 32.98 rupees (from May 6, 2020). This constitutes an increase of 13 rupees per liter.
The sales volume of diesel in the country greatly exceeds that of gasoline because it is widely used by large and small commercial vehicles, and the excise tax per liter is 15.83 rupees (from July 6, 2019). The price rose to 18.83 rupees (from March 14, 2020), and rose 69% to 31.83 rupees (from May 6, 2020). This constitutes an increase of 16 rupees per liter-3 rupees more than gasoline. This explains why the excise tax on diesel is more than twice that of gasoline.
| Gasoline and diesel prices increase in fiscal 2021 | ||||||
| April 1, 2020 | April 1, 2020 | March 31, 2021 | March 31, 2021 | Price increased | Price increased | |
| gasoline | gasoline* | diesel engine* | gasoline* | diesel engine* | gasoline* | diesel engine* |
| Mumbai | 75.28 rupees | 65.19 rupees | 96.98 rupees | 87.96 rupees | 21.70 rupees | 22.77 rupees |
| Delhi | 69.59 rupees | 62.29 rupees | 90.56 rupees | 80.87 rupees | 20.97 rupees | 18.58 rupees |
| Chennai | 72.28 rupees | 65.71 rupees | 92.58 rupees | 85.87 rupees | 20.30 rupees | 20.16 rupees |
| Calcutta | 72.27 rupees | 64.60 rupees | 90.77 rupees | 83.75 rupees | 18.50 rupees | 19.15 rupees |
*Price per liter
According to a written reply from the Minister of State for Oil and Gas Rameswar Teli in Lok Sabha, the price of gasoline has increased by 76 times in fiscal 2021, and the price of diesel has increased by 73 times. Therefore, in the 12 months from April 1, 2020 to March 31, 2021, in New Delhi, gasoline prices increased by Rs 20.97 per liter and diesel prices increased by Rs 18.58 per liter. Motorists in Mumbai have to pay more than the Delhi brothers-gasoline rose 21.70 rupees and diesel rose 22.77 rupees.
Data shows that gasoline prices are reduced by 10 times and diesel prices are reduced by 24 times. There was no increase or decrease in interest rates for 153 days for gasoline and 168 days for diesel.
This is not helpful to the career of motorists, because as the center continues to increase consumption taxes throughout the year, most states have adopted the same approach to value-added tax (VAT).
A large part of the price of gasoline and diesel is tax
One of the reasons for the plunge in fuel prices is the high levels of central and state taxes. For example, in Delhi, on July 16, 2021, the cost of gasoline was 101.54 rupees per liter, of which 32.40% (32.90 rupees) was consumption tax and 23% (23.43 rupees) was national value-added tax. The club pays 56.33 rupees or 55.467% per liter of gasoline for these two taxes and drivers.
As for diesel, it was priced at 89.87 rupees per liter in the capital on July 16, with a consumption tax component of 31.80 rupees or 35.38%, and a value-added tax of 13.14 rupees or 14.62% of the retail price. Together, these two taxes are 44.94 rupees, which is exactly 50% of the price the driver pays for fueling diesel.
Will oil prices weaken?
In short, it is too high to expect gasoline and diesel prices to fall soon. Although OPEC will reduce production by 9.6 million tons per day from May 2020, it has recently agreed to increase its supply by 400,000 barrels per day from August 2021, but the scale is too small to guarantee a sharp drop in crude oil prices.
As most global economies, especially the United States, Europe, and China, re-enter the work mode, the transportation and shipping industries are on the rise. This is clearly reflected in the price increase of the crude oil basket. The price of crude oil plummeted to US$19.90 per barrel in April 2020. At that time, the world saw the severe impact of the pandemic for the first time. In recent months, the price of crude oil has gradually risen to around US$70 per barrel.
