Petrol and diesel prices in India continued to surge. After a gap of two days, the state-run oil marketing companies hiked the petrol and diesel prices again on Friday. While petrol became costlier by 27 paise, diesel increased by 28 paise on May 31. A litre of petrol now costs Rs 100.98 in the financial capital, highest ever. In Delhi, petrol is about to touch Rs 95-a-litre mark.
To tackle the rising fuel prices in India, Reserve Bank of India (RBI) on Friday suggested states and the Union government need to contain the taxes on petrol and diesel. “Excise duties, cess and taxes imposed by the Centre and states need to be adjusted in a coordinated manner to contain input cost pressures emanating from petrol and diesel prices," the Monetary Policy Committee (MPC) of the Reserve Bank of India said.
“Going forward, the inflation trajectory is likely to be shaped by uncertainties impinging on the upside and the downside. The rising trajectory of international commodity prices, especially of crude, together with logistics costs, pose upside risks to the inflation outlook," the central bank further added.
The price of auto fuel in India depends on international crude oil prices, rupee-dollar exchange rate. Moreover, the central government and states levy various taxes — excise duty and Value Added Tax (VAT) on petrol and diesel. Dealer’s commission and freight charges are also added in the fuel price. It must be noted that petrol and diesel do not come under the purview of goods and services tax (GST).
The Centre raised excise duty by Rs 13 on petrol and Rs 16 on diesel between March 2020 and May 2020. The duty now stands at ₹31.8 on diesel and ₹32.9 on petrol. VAT varies from state to state. Madhya Pradesh, Rajasthan levy over 30% VAT — the highest among states. The dealer’s charge is different for petrol and diesel. The commission also varies with the location of fuel pumps, ranging from Rs 2-4 per litre.
Fuel prices have been soaring since the beginning of this month. State-run companies resumed daily revisions on May 4 after an over 18-day halt. Since then, petrol price has risen by Rs nearly Rs 4 per litre and diesel by almost Rs 5.
Reserve Bank of India has kept the policy rates unchanged and maintained accomodative stance on June 4. “On balance, the MPC was of the view that at this juncture, policy support from all sides is required to regain the momentum of growth that was evident in H2:2020-21 and to nurture the recovery after it has taken root. Accordingly, the MPC decided to keep the policy rate at its current level of 4 per cent and to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward," RBI Governor Shaktikanta Das said.