Fuel price hike Highlights: The diesel rates have also touched a high of Rs 68.53 and Rs 72.96 per litre in Delhi and Mumbai, respectively.
Rising fuel prices have set off a political firestorm in the past few days as petrol and diesel rates have skyrocketed. On Thursday, petrol price touched Rs 85.29 per litre in Mumbai, while in Delhi the price inched higher to a new record of Rs 77.47 per litre. Similarly, the diesel rates have also touched a high of Rs 68.53 and Rs 72.96 per litre in Delhi and Mumbai, respectively.
Amid mounting pressure from the Opposition parties on the relentless fuel price hike, Union Oil Minister Dharmendra Pradhan said that the Centre was deliberating on an “immediate solution” to deal with rising fuel prices. “The oil ministry is of the view to bring petroleum products under the purview of the GST in order to bring down the prices of petrol and diesel. We are deliberating on an immediate solution to this problem till that time,” Pradhan said in Bhubaneswar.
Meanwhile, Union Minister Nitin Gadkari had on Wednesday said subsidising petrol and diesel to bring down their rising retail prices will take money away from social welfare schemes of the government and that increase in oil prices is “unavoidable” since India is now linked to the global economy. “This is an unavoidable, economic situation. It is directly linked to the global economy. If we have to sell it (petrol/diesel) cheap, it means we will have to buy it at higher prices and subsidise it here,” Gadkari told The Indian Express.
Also Read | To reduce fuel price, government looks at ONGC to share the burden
Petrol, diesel price hike LIVE: Union Petroleum and Natural Gas Minister Dharmendra Pradhan.
West Bengal Chief Minister Mamata Banerjee on Thursday said that the Centre should look into the issue of surging fuel prices not from a political angle but from the common man's point of view.
The everyday increase in petrol and diesel prices is causing severe problem for the common people, Banerjee said. "This price hike causes severe problem for the common people. This is an issue of the common people. The central government must look into this," Banerjee told reporters in Kolkata.
-PTI
Union Petroleum Minister Dharmendra Pradhan said that the hike in fuel prices is due to circumstances in the international market. 'The value of Indian rupee has reduced in comparison to dollar and there has been a surge in oil prices. We are trying to control prices. GST is one way to ease the situation, other ways also being thought of,' Pradhan told ANI.
Maharashtra Chief Minister Devendra Fadnavis today said fuel prices will come down once the Centre builds a consensus to bring petrol and diesel under the Goods and Services Tax (GST).Petrol and diesel prices are defined by international crude oil rates, Fadnavis noted.
"A task force is already working on reducing the fuel prices. If it (petrol and diesel) can be brought under GST, rates will come down. Maharashtra has already given its consent for it," the chief minister told reporters in Mumbai.
The GST Council will also have to look into aspects like revenue losses before taking a decision, he said. Talks are going on with finance ministers of all states, Fadnavis said, adding that "other states have not given their consent yet." "Once petrol and diesel are brought under the ambit of GST, its threshold will change, because, right now, taxes upon taxes are levied which increases rates. GST will ensure a single tax," he said.
-PTI
Terming the hike in petrol and diesel price "historic", IYC's national spokesperson Amrish Ranjan Pandey said, "The steepest fuel price hike will have cascading effects on other essential commodities affecting people already suffering from the exhaustive policies of the NDA government."
The activists had planned to march from the IYC to Shastri Bhawan, which houses the Ministry of Petroleum and Natural Gas, but police did not allow them to proceed by erecting barricades few meters away from the ministry office.
Youth Congress activists staged a protest against the steep rise in petrol and diesel prices near the Ministry of Petroleum and Natural Gas in New Delhi on Wednesday, blaming the BJP-led Centre for the same. The protest, led by Indian Youth Congress National General Secretary Sitaram Lamba and National Secretary Khushboo Sharma, was organised by the Delhi Pradesh Youth Congress.
Similar protests would be held in all the districts on Saturday and Sunday, TMC secretary-general Partha Chatterjee said. "The prices of petrol and diesel have touched an all-time high and it has affected the common people. The protest would be organised by Trinamool Youth Congress. The Centre did not slash the prices of petrol and diesel even when the prices were low in the international market," he said.
Trinamool Congress said that it would organise protests in the city on Friday against the steep rise in fuel prices as it affected the common people.
At present, tax rates on petrol and diesel in Punjab are about 36 per cent and 17.22 per cent, respectively. However, tax rate on petrol and diesel in Chandigarh stand at about 19.65 and 11.65 per cent, respectively, he said. "We have given memorandum to the Punjab Finance Minister Manpreet Badal for reduction in VAT. But nothing has been done yet," said Mongia, who has a fuel pump in Mohali.
The disparity in petrol and diesel prices has particularly hit the businesses of petrol pump owners in the border districts of Sangrur, Patiala, Bathinda, Gurdaspur, Mohali, Fathegarh Sahib, Ropar, Hoshiarpur, Gurdaspur and Mansa.
Mongia said, "With the record rise in retail prices, the rampant smuggling of fuel is taking place. Be it car owners or industry which requires fuel, all of them have switched over to Chandigarh-based fuel pumps. You can check the fuel pumps at Chandigarh and you will find 90 per cent of vehicles belong to either Punjab or Haryana."
Pump owners further said they are suffering losses as vehicles and industries that require fuel cross over to Chandigarh-based fuel pumps to meet their petrol and diesel requirements. "With the price of fuel soaring frequently, the business of petroleum products has been affected adversely," said Ashwinder Mongia, member of Petrol Pump Dealers' Association of Punjab.
Fuel pump owners in Punjab on Wednesday also sought reduction in taxes on petrol and diesel, alleging that higher retail prices in the state have led to smuggling of fuel from Chandigarh, where rates are comparatively lower.
Putting the onus on the Centre, he said, "Let's hope that something fruitful in this regard transpires in today's meeting between Union Petroleum minister Dharmendra Pradhan and oil companies". In October last year, the state government had reduced the VAT on petrol and diesel by 4 per cent. Prior to that, the state government used to charge 24 per cent VAT on petrol and diesel.
"Gujarat is the only state which had reduced VAT some time back to give relief to the citizens. Though VAT on fuel in many states is higher than Gujarat, these states have not reduced this tax like we had done," Patel, who also handles Finance portfolio, said. He added that although the prices are increasing, the use of petrol and diesel is not decreasing.
"Fuel prices change as per the international crude prices. There are many states where VAT is higher than what it is in Gujarat today. VAT on fuel is the main source of income for us," Patel said in response to a query. Presently, Gujarat government charges 20 per cent VAT and 4 per cent cess on both petrol and diesel.
The Gujarat government had on Wednesday indicated that it has no immediate plans to reduce the Value Added tax (VAT) on petrol and diesel, claiming that such tax revenue is the key source of income. Gujarat Deputy Chief Minister Nitin Patel had said that the state government had already provided a relief to the people by reducing VAT on fuel last year.
The government raised excise duty nine times between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre. The Centre levies Rs 19.48 as excise duty on a litre of petrol and Rs 15.33 on diesel. State sales tax or VAT varies from state to state. Unlike excise duty, VAT is ad valorem and results in higher revenues for the state when rates move up.
Incidentally, ONGC and Oil India Ltd had till June 2015 provided for up to 40 per cent of the annual fuel subsidy bill. This they did by way of providing discounts on crude sold to downstream refining and marketing companies, IOC, BPCL, and HPCL. This discount helped the retailers make good a part of the losses they incurred on selling petrol and diesel below cost.
China on April 1, 2006, began levying the special upstream profit tax on domestic oil producers to redistribute and allocate the windfall income enjoyed by the oil companies and subsidise disadvantaged industry and social groups that are most affected by soaring crude oil prices. In 2012, it raised the windfall tax threshold to $USD 55 per barrel.
Under the scheme, oil producers, who get paid international rates for the oil they produce from domestic fields, would have to part with any revenue they earn from prices crossing USD 70 per barrel mark. The revenues so collected would be used to pay fuel retailers so that they absorb spikes beyond the threshold levels, they said. This may be accompanied by a minor tinkering with excise duty rates to give immediate relief to consumers. States too would be asked to cut sales tax or VAT to show a visible impact on retail prices.
The government may levy a windfall tax on oil producers like Oil and Natural Gas Corp (ONGC) as part of a permanent solution it is working on for moderating the spiralling retail prices of petrol and diesel, according to PTI. The tax, which may come in form of a cess, will kick in the moment oil prices cross USD 70 per barrel, sources privy to the development said.
The government raised excise duty nine times between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre. The Centre levies Rs 19.48 as excise duty on a litre of petrol and Rs 15.33 on diesel. State sales tax or VAT varies from state to state. Unlike excise duty, VAT is ad valorem and results in higher revenues for the state when rates move up.
On excise duty, Prasad said the proceeds from such taxes were used for building highways, digital infrastructure, supplying electricity to villages, for hospitals and education. “So tax on fuel is linked with developmental issues. We understand that there is a compelling need for a long-term solution, structured solution,” he said.
The 10-day relentless price increases are building pressure on the government to cut excise duty to give immediate relief to consumers but after a meeting of the Union Cabinet headed by Prime Minister Narendra Modi, Prasad offered little indication if a reduction in tax was coming.
There was a 19-day freeze in revising rates before Karnataka went to polls, and since the time the hiatus ended on May 14, rates have gone up by Rs 2.54 a litre in case of petrol and Rs 2.41 in diesel.
Ravi Shankar Prasad had said, “The government is keen that instead of having an ad hoc measure, it may be desirable to have a long-term view which addresses not only volatility but also takes care of the unnecessary ambiguity arising out of frequent ups and downs. That process is underway." The BJP-led government had in June last year junked a 15-year old practice of revising rates every fortnight and introduced daily revisions which worked well except during periods immediately preceding an election.
“The idea has been accepted in principle but the methodology and the numbers are to be worked out,” he said. Even after discount, ONGC’s net realised price on crude oil would be higher than $56 which it earned per barrel in fiscal 2017-2018. At present, the government subsidy is limited to cooking gas, LPG and kerosene with transport fuels petrol and diesel out of its ambit. The burden sharing, said the official, was being considered as the “long-term solution to address the volatility and frequent revisions in rates” which Union Law and IT Minister Ravi Shankar Prasad announced on Wednesday.
The official said that ONGC’s contribution could pare the required price increase in petrol and diesel by one-third with an additional marginal relief provided by reducing the dealers’ commission by 18 paise per litre on diesel and 23 paise per litre on petrol. ONGC’s burden sharing, to be implemented through a mechanism which is still in works, would provide close to Rs 30,000 crore for this exercise, he said. This is equivalent to a Rs 2-per litre cut in excise duty on both petrol and diesel.
ONGC supplies an estimated 20 per cent of the country’s total crude oil requirement to refining-cum-marketing companies IOC, HPCL and BPCL. The official said the exact price cap hasn’t been determined as ONGC has asked for a higher price to fund its capital expenditures for the next two years. Incidentally, ONGC and OIL last contributed to fuel subsidies in June 2015 with contributions of over 40 per cent of the annual subsidy bill.
“The Ministry plans to direct ONGC to sell its crude oil at below ruling international prices by capping the price at, say, $70 for the entire fiscal year. Oil India Ltd (the other national oil producer) will not be a part of this scheme,” a government official said. Read more
Wary of slipping on fiscal deficit targets, the Finance Ministry is reluctant to take a hit on excise duty levied on petrol and diesel. So, as rising fuel prices set off a political firestorm, it is the Petroleum Ministry which has stepped in. Sources have told The Indian Express that it is working on getting Oil & Natural Gas Corporation (ONGC) to take the burden.
Nitin Gadkari said, “…only 30 per cent of our oil is indigenous, while 70 per cent is through imports. So we will try to lower the cost of our imports, we can carry out some global acquisition of oil fields in the world, like we did in Russia. But naturally, we don’t have the capital to fulfil the requirement of 70 per cent imports.”
Asked if taxes levied on petroleum products should be cut to give relief to consumers, he said: “That is the foundation of the economy. If anything has to be decided on that, our Finance Minister will decide.” A proponent of alternative fuels, Gadkari said the government was instead working on proliferating methanol, ethanol, biodiesel, electric vehicles and such “import substitute, cost-effective and pollution-free” alternatives.
Nitin Gadkari said that subsidising retail prices of petrol and diesel would take money away from irrigation schemes, the Ujwala scheme of free LPG to villages, the rural electrification process, the Mudra scheme of loans, and others. “Now there is a health insurance scheme planned for 10 crore families. There is the crop insurance scheme. We have only a limited amount of money. So if we subsidise (petrol/diesel), toh gadbad ho jaayega,” he said.
Congress' Randeep Surjewala tweets: "Modiji is 'Maun' as fuel prices increase for 11th day in a row. His Union Minister threatens- if fuel prices fall, so will, welfare spending. Will PM Modi accept the Nation's challenge to utilise the 10 Lakh crore looted through Central Excise in 4 years to reduce fuel prices?"
“This is an unavoidable, economic situation. It is directly linked to the global economy. If we have to sell it (petrol/diesel) cheap, it means we will have to buy it at higher prices and subsidise it here,” Gadkari told The Indian Express in an interview Wednesday. “If we subsidise that, all the money from our social security schemes will vanish,” he said.
Union Minister and senior BJP leader Nitin Gadkari has said subsidising petrol and diesel to bring down their rising retail prices will take money away from social welfare schemes of the government and that increase in oil prices is “unavoidable” since India is now linked to the global economy.
The Congress, meanwhile, hit out at PM Modi over the price hike post-Karnataka elections and alleged that the petrol cost was “as a tool” benefit BJP during polls. “If he (Modi) can control the price (of petrol and diesel) for his own interest during the polls in Karnataka, why can’t he do it now and all year around in public interest? That means fuel prices is just a tool for him to get the benefit in elections. On behalf of the people of India, that at least control the price if you cannot reduce it. Modi should give priority to the interest of public over his political interests.”
Referring to the brunt borne by the middle class because of the fuel hike, Union Petroleum Minister Dharmendra Pradhan had said that the government is working out a solution to deal with the issue. “It’s not in our hand. There is less production of oil in OPEC countries. The government will soon come out with a solution,” he told reporters here. Pradhan, however, did not spell out the details. Stressing the need for stable and moderate oil prices, he said the surging fuel prices have a negative impact on consumers and the Indian economy. The concerns have also been conveyed to OPEC kingpin Saudi Arabia, requesting it to ensure stable prices.
With this increase, petrol has touched an all-time-high, breaching the previous high of Rs 76.06 per litre touched in New Delhi on September 14, 2013. Diesel rates are also at an all-time high level.
Crude remains an important factor in the recent price hike as Brent crude prices have risen by over 19% from $68 per barrel in end-February to over $80 per barrel now.
If rising crude oil prices (over $80 per barrel on Wednesday) are an important reason for the hike in domestic fuel prices, so are high taxes levied by the Centre (excise and cess) and states (sales/VAT).A breakup of the petrol price in Delhi shows that while the price for dealers is Rs 37.65 per litre or 49% of the retail selling price, the excise duty (Rs 19.48 per litre) accounts for more than 25% of the retail price. VAT in Delhi (27%) accounts for another 21%. The final component is the dealer commission at Rs 3.63 per litre. Over the last four years, this has jumped significantly. Read More
Congress leader and former Union Finance Minister P Chidambaram on Wednesday criticised the Centre for the fuel price hike and claimed that the rate can be reduced by Rs 25 per litre but the government is not doing it.
“Bonanza to central government is Rs 25 on every litre of petrol. This money rightfully belongs to the average consumer. Central government saves Rs 15 on every litre of petrol due to fall in crude oil prices. It also puts an additional tax of Rs 10 on every litre of petrol,” Chidambaram tweeted.
Since the dynamic pricing system was resumed on May 14, prices have increased over Rs 2.50 per litre across all metropolitan cities, leading to demands from various quarters for urgent action by the government to curb the price rise.