Excise Taxes and Robin Hood Coverage – Why Gasoline Costs Are Rising Regardless of Low World Charges

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Excise Taxes and Robin Hood Policy - Why Fuel Prices Are Rising Despite Low Global Rates

File photo of a gas pump in New Delhi | Manisha Mondal | The pressure

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New Delhi: Gasoline and diesel prices hit all-time highs this week. In Delhi, for example, the price of gasoline rose to Rs 85 / liter and the price of diesel to Rs 78 / liter.

As ThePrint Editor-in-Chief Shekhar Gupta noted in episode 668 of Cut The Clutter, crude oil prices around the world had fallen to an all-time low.

“Yet our gasoline and diesel prices keep going higher and higher, and many of you are complaining that the Modi government doesn’t seem to be bothered,” he noted.

How is fuel taxed?

The income from the sale of gasoline and diesel is one of the highest sources of income for both the central government and the state government.

“So a lot of opposition parties are making noise about rising fuel prices, but what’s more, they don’t escalate it too much because they benefit from it, because they continue to increase their sales tax or sales tax accordingly,” noted Gupta.

In fact, fuel has been removed from the scope of the tax on goods and services along with alcohol. While alcohol is taxed by the state government, fuel is taxed by the central government in the form of indirect taxes.

During the Congress-led UPA administration, crude oil prices rose to $ 142 a barrel – down from $ 52 a barrel today.

Also read: Gasoline, diesel prices rise for the 7th day in a row, prices rise by about half a rupee

Prices in other countries

Gupta also listed the price of fuel in other countries. In Qatar, the price of gasoline is 27 rupees, a third of what is charged in India. In the US, it’s 52 to 60 percent of what it is in India.

China’s rate at Rs 75 / liter is comparable to that of India. However, in Pakistan the price is Rs 50 / liter, in Sri Lanka Rs 61 / liter, in Nepal Rs 68 / liter and in Afghanistan Rs 37.50 / liter.

“Now it’s not like India has the most expensive fuel in the world. Check out some other countries – Poland Rs 90, Japan Rs 94, South Korea Rs 96, UK Rs 118, Germany Rs 119, France Rs 126, Syria Rs 150 … and Hong Kong looks like the most expensive fuel in the world that is on par on Rs 173, ”said Gupta.

He explained what is behind the pricing structure and said that crude oil is being brought to the same price around the world, with refining costs incurred to convert it into various products including gasoline.

“But then the governments tax this fuel. They tax it on revenue that is very important to the government and many like those in Europe are taxing it – a carbon tax to discourage people from using private vehicles, “he said.

However, the carbon tax is common in richer countries. So how is it that India has prices that are comparable to these countries? Asked Gupta.

The China example

To answer the question of why India’s prices are comparable to those of richer countries, Gupta used the example of China, which also has higher prices.

The first reason is that China and India import most of their hydrocarbons. “So it is important that they keep prices on the higher side so that consumption doesn’t increase too much, because if it does, your imports will increase,” said Gupta.

Second, the Modi government discovered that an easy way to make more for the treasury is to keep raising taxes on fuel. The government had actually managed to increase the total excise tax collection from 99,000 rupees per year to 2.4 billion rupees per year in the center within two years of the UPA government losing power.

“When the price went down, the increased excise duty … on your gasoline price didn’t go down,” Gupta said, adding, “And later, when crude oil prices started to go up, the price at which your gasoline pump gets its fuel from the gasoline the refinery went up likewise – the Modi government did not cut the consumption tax. “

“… It is not wrong to say that the Modi government did not pass the benefit of lower crude oil prices on to consumers. If anything, they continued to pull money out of consumers’ pockets by further increasing these excise taxes, ”Gupta said.

Also read: Covid fear high taxes will cause India’s gasoline usage to overtake diesel

What fuel taxes mean for India

Excise Tax Breakdown on Fuel Gupta said if you buy a liter of gasoline or a liter of diesel, 63 percent of what you pay for your gasoline is going, that is Rs 52.50 and 58% or Rs 42.70 for what you pay for diesel towards taxes.

On average, nineteen percent of these taxes go to the states and the rest to the center.

In the 2019-2020 fiscal year, the Modi government levied a total of Rs.339 billion in excise taxes – roughly double what the UPA government levied six years ago.

In 2014-2015, the states had raised 1.6 billion rupees in excise collections, which is now 2.21 billion rupees – a 100 percent increase.

“If fuel prices go up a little under the UPA, people will be on the streets, TV channels will go insane … you don’t see any of that today,” commented Gupta.

He concluded by saying, “What the Modi government is doing is a Robin Hood act, that is, robbing the rich and distributing them to the poor.”

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