High taxation makes petrol, diesel expensive

Retail prices 3 times basic refining cost

May 07, 2020 10:38 pm | Updated 10:38 pm IST - MUMBAI

With the Centre increasing excise duty and road cess on petrol and diesel by ₹10 and ₹13 a litre respectively, and States also, in their turn, hiking sales tax to cover their dwindling coffers, retail prices of petrol and diesel are now three times their basic refining cost.

A litre of petrol would have cost ₹21.84 and diesel ₹21.30, including freight cost and dealer commission but excluding excise duty and VAT due to falling prices of crude oil prices globally.

A litre of petrol now has ₹32.98 of excise duty and ₹16.44 as VAT inbuilt in the retail prices. Similarly, a litre of diesel has ₹31.83 as excise duty and ₹16.26 as VAT inbuilt in the retail prices. Consumers will be denied the benefit of falling crude oil prices as the government has appropriated the same. Retail prices will remain the same and will not fall, as they would have, if the government had not increased duties.

For the oil companies, it is a notional loss of margins as they have now been forced to completely pass on the benefit of lower prices to the government.

“A higher marketing margins would have helped OMCs offset some of the losses due to lower fuel demand, weakness in refining margins and inventory loss,” Paras Bothra, president equities, Ashika Stock Broking told The Hindu.

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