Fuel prices on a roll but no hint of a government tax cut

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NEW DELHI: The price of gasoline remained on a roll, claiming a new peak at Rs 84.70 per liter in the national capital and 2 paise less than its historic high of Rs 91.07 in the financial capital of the country , Mumbai Thursday.
The price of diesel also rose as retailers continued to pass on the phased impact of the week-long rally in crude. After the latest hike, diesel cost Rs 74.88 per liter in Delhi and Rs 81.60 in Mumbai.
As consumers continued to pay through the noses, there was no indication that the Center or state governments were considering a reduction in the hefty taxes they levy on fuels, amplifying the impact of the crude oil hike. In Delhi, for example, consumers pay Rs 32.98 as excise duty on every liter of gasoline and Rs 31.83 on diesel. VAT is Rs 19.32 on gasoline and Rs 10.85 on diesel.
The only hope for consumers, it seems, lies in a correction in the global oil market, which saw the benchmark Brent drop to $ 55.64 a barrel, from $ 57 days ago.
Lockdown reports following a new wave of viruses in parts of China, the world’s second largest oil consumer, and extended Covid-19 restrictions in Europe on a new tempered market fear that has been backed by the vaccine deployments and the Saudi offer to cut production by an additional one million barrels per day.
As the market grapples with the challenge of these mixed signals, Indian consumers, who import more than 80% of its oil, continue to hope for relief through reduced fuel taxes which account for around 60% of its oil. price at the pump.
Central excise duty is perceived as a fixed amount. But VAT increases with any increase in the base price because it is charged as a percentage of the base price.
The Center had increased the excise duty on gasoline cumulatively by Rs 13 per liter and diesel by Rs 16 in two installments on March 16 and May 5 to take advantage of the historic collapse in crude prices as the Covid-19 pandemic has shut down economies around the world. States too had increased VAT.
In India, demand had fallen by 70% as the country was blocked from March 24. But fuel retailers did not raise prices at the pump, adjusting higher excises against lower crude prices. But they quickly revised the prices to pass on the VAT increased by the states. Yet consumers were largely unaffected, as only essential service vehicles were on the road.
But now that demand has returned to normal, consumers are paying through the nose because the center and the states continue to increase excise duties.


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