Fuel debate flares up
Maverick ruling party legislator Subramanian Swamy left the Modi government red faced on Monday after his assertion that the pump price of petrol ought not to be higher than Rs 48 a litre - and any price that was higher amounted to "extortion".
- Published 4.09.18
New Delhi: Maverick ruling party legislator Subramanian Swamy left the Modi government red faced on Monday after his assertion that the pump price of petrol ought not to be higher than Rs 48 a litre - and any price that was higher amounted to "extortion".
Swamy's comment came after petrol prices were raised to levels above Rs 85 a litre in Mumbai - with the government blaming the spike to the sharp rise in crude prices.
The price of petrol in Delhi rose to a record Rs 79.15 a litre and diesel climbed to a fresh high of Rs 71.15, according to a price notification of state-owned fuel retailers.
Motorists in Calcutta have to pay Rs 82.06 for a litre of petrol and Rs 74 per litre of diesel.
The comment from the outspoken ruling party MP put the spotlight on the cascading levies from the Centre and the states that fuels have faced.
The Modi government scrambled to put a lid on the controversy by suggesting that the taxes levied by the Centre amounted to only 20 per cent of all levies slapped on petrol and diesel, while the state taxes accounted for 80 per cent.
The Centre also tried to seek refuge in the argument that the taxes on petrol and diesel were justified as they yielded revenues to the government that it could use to fund myriad social welfare schemes targeted at the poor.
Analysts expect a further spike in global crude prices as the November 4-deadline for US sanctions on Iran oil nears.
Some global players such as prominent hedge funds Andurand Capital and Westbeck Capital are betting on oil to spiral to $150 a barrel.
The US Energy Information Administration in its short-term energy outlook has said crude prices will average $72 a barrel in 2018 and $71 a barrel in 2019.
The global crude index of Brent traded around $78 per barrel on Monday.
When the global crude prices touched a record $147 per barrel in July 2008, state owned refiners sold petrol for Rs 52.20 paise a litre in Calcutta. The fuel was a controlled product and the subsidy was shared between the oil companies and the government.
K. Ravichandran, senior vice-president and group head, corporate ratings, Icra said, "we estimate that for an Indian basket crude oil price of $75 per barrel and an exchange rate of 71 for the balance FY2019, the total under recoveries on sensitive products could be in the range of Rs 460-480 billion."
The Centre now levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel.
Sales tax, or VAT, varies from state to state. Unlike excise duty, VAT is ad valorem and results in higher revenues for the states when the rates move up.