The Telegraph
Since 1st March, 1999
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Pay more for oil, keep govt solvent

New Delhi, Dec.7: Petrol would cost only Rs 17.46 a litre and diesel would be a tad more expensive at Rs 18.07 if there were no customs, excise duty or sales tax to pay.

That's what Americans pay ' well, not quite, but just a shade more. Average self-serve pump prices in the US have settled at around $2.01 a gallon (which is about 3.785 litres). At a rupee-dollar conversion rate of Rs 43.72 (the closing level on Tuesday), it works out to Rs 23.22 a litre.

Why go that far' Look at next-door Pakistan ' they may or may not have proper democracy but they get diesel cheap. Petrol in Islamabad costs around (Indian) Rs 27 a litre and diesel Rs 17.82.

Indian consumers pay more by way of levies and taxes than the base price of the fuel they use. Duties and taxes on petrol amount to a hefty Rs 20.38, which raises the price of the 'rich man's' fuel to Rs 37.84 a litre (duty and price in Delhi), according to petroleum minister Mani Shankar Aiyar who gave this information today in reply to a question in the Rajya Sabha.

The incidence of these levies works out to Rs 8.21 a litre for diesel, which takes the price to Rs 26.28 (Delhi).

Aiyar has asked states to cut sales tax, which in many states forms half or more of the total amount of levies on petrol and diesel, as the Centre has brought some duties down to cushion the impact of rising international prices.

For the first time, this year the government reduced the excise duty on petrol, diesel and cooking gas by four, three and eight per cent on June 16 and then by a further three, three and four per cent in the second round on October 19.

The information provided by Aiyar becomes important in the context of the tug-of-war between the government and the Left, which has been pressing for a rollback of the price increases announced recently for petrol, diesel and cooking gas. It wants either the government or the oil companies to absorb the impact of the spike in global prices.

Neither the Centre nor any state is ready to cut taxes as petroleum is a high-revenue item. Aiyar himself has been trying to get the finance ministry to cut duties on both petroleum products and crude oil.

Faced with the difficult task of bridging the gap between government expenditure and revenue, P. Chidambaram is reluctant to do that.

An example of how much petrol and diesel are being squeezed for revenue lies in the fact that though neither of the two fuels is imported, a notional customs duty of Rs 2.12 on petrol and Rs 2.29 on diesel for every litre is charged from consumers.

India imports crude oil, on which there is customs duty anyway, and not refined products.

The fact that duties and taxes ' there is also a 2 per cent education cess that the Centre charges and in states like Bengal governments load on a cess of their own on top of sales tax ' are imposed on the value of the products means each time the price of petrol or diesel goes up, the burden of imposts also escalates.

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