Petrol, diesel get costlier as states increase VAT amid coronavirus crisis

Both Kolkata and Mumbai saw an increase of Rs 1.01 each on petrol to Re 1 each on diesel. However, prices in Delhi remained unchanged

At a time when coronavirus (Covid-19) lockdown has hit the common man in India, petrol and diesel prices, too, saw an increase owing to rise in value-added tax (VAT) in states like Maharashtra, Karnataka, West Bengal, and Rajasthan.

Kolkata and Mumbai saw an increase of Rs 1.01 on petrol and Rs 1 on diesel. However, prices in Delhi remained unchanged for the 17th consecutive day on Thursday, with petrol prices at Rs 69.59 a litre and diesel at Rs 62.29 a litre.

“The increase in retail selling price (RSP) of petrol and diesel in some states like Maharashtra, Karnataka, West Bengal, etc, with effect from April 1, 2020, is purely on account of increase in VAT rates by the respective state governments on both products from that date. OMCs have made no change to the basic selling price and have maintained it at the same level,” state-run Indian Oil Corporation (IOC) said in a statement. 

On March 14, the Centre, too, had raised excise duty on petrol and diesel by Rs 3 per litre. The move is likely to bring in additional revenue of around Rs 43,000 crore to the exchequer in a year.  While the special excise duty was hiked by Rs 2, road cess was raised by Rs 1 per litre each on both petrol and diesel. On Thursday, the price of petrol in Mumbai and Kolkata was seen at Rs 76.31 a litre and Rs 73.30 a litre. On the other hand, diesel prices were seen at Rs 66.21 and Rs 65.62 a litre respectively. 

Based on the rates in Delhi, central and state taxes contribute around 54.3 per cent of petrol price and 45 per cent of diesel price. The excise duty on petrol now stands at Rs 22.98 a litre and diesel at Rs 18.83 a litre.

On April 1, state-run oil marketing companies — IOC, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation — have fully transitioned to Bharat Stage (BS)-VI-compliant petrol and diesel across the country.

The companies have incurred capital expenditure (capex) to the tune of Rs 35,000 crore in upgrading their countrywide refineries, pipelines, and marketing distribution network to be able to usher in BS-VI fuels, directly leapfrogging from BS-IV fuels.

“Further, the refineries shall incur incremental operating costs on a sustained basis to manufacture BS-VI petrol and diesel with 10 parts per million (ppm) of sulphur, against 50 ppm in BS-IV fuels earlier,” IOC said.

Taking into consideration the capex costs and the likely incremental operational expenditure costs, there will be some impact on the RSP of petrol and diesel as well.