On May 1, 2020, petrol cost Rs 69.59 a litre at pumps in delhi on a base price of Rs 27.95; diesel retailed for Rs 62.29. Data for this May 1 shows base price going up by Rs 3.53 to Rs 31.48, but retail price rising by Rs 20.81 to Rs 90.40. Some could argue that India's crude cost has risen from $31 per barrel in May 2020 to $66 at present. But petrol and diesel prices are set according to their international quotes and the rupee-dollar exchange rate. This explains why base prices have risen modestly and not doubled the way crude has.

The answer to the conundrum lies in the Centre's tax hikes last year and subsequent increase in VAT by states. The Centre raised excise duty by Rs 13 on petrol and Rs 16 on diesel between march and May last year when oil prices collapsed due to the pandemic. The state-run retailers, who control 90% of the market, stopped the price revisions from february 28 till march 23 on government 'nudge' But now that elections are over, the revisions are back and petrol price is hitting the century in more cities every day. The retailers raised pump prices to pass on the burden. Consumers remained largely unaffected as the country was under lockdown.

Agriculture infrastructure development tax was slapped on petrol and diesel. Central taxes remained unchanged at Rs 32.90 on a litre of petrol and Rs 31.80 on diesel.

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Sachin

13/05/2021 10:58 AM