No plans to cut taxes on petrol, diesel says Oil Minister Dharmendra Pradhan

Oil Minister Dharmendra Pradhan on Wednesday ruled out any cut in excise duty, for now, to give relief to consumers from the spiralling retail prices of petrol and diesel which have touched all-time highs.

"There is no such proposal at present," he said in the Rajya Sabha when asked if the government was looking at cutting taxes to cool off prices.

Petrol price crossed the Rs 94-mark in Mumbai and diesel soared to Rs 84.63 per litre on Wednesday. Retail pump rates have not seen a reduction in almost 11 months.

International benchmark rates had plunged to decade lows in April. The government had hiked excise duty on petrol by a record Rs 13 per litre and on diesel by Rs 16 a litre to mop up gains arising from the fall in rates but did not cut taxes when oil prices bounced back.

Retail petrol price have risen by Rs 18.01 per litre since mid-March 2020 and diesel rates have gone up by Rs 15.44.

Replying to questions on rising fuel prices, Pradhan said retail pump rates are governed by international prices as India is 85 per cent dependent on imports for meeting its need.

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"When the international price of crude oil is higher, we have to increase the prices and when the international price is lower, we have to decrease the prices here too. This is a market mechanism which is followed by oil marketing companies. We have given the freedom to them," he said during Question Hour.

The retail price, he said, is made up of three components -- base price that reflects the cost of international oil, central excise duty and state taxes.

Both central and state governments rely heavily on collections from taxes on these products for meeting their developmental and welfare priorities, he said.

"They need some resources... (and) this (taxing petrol and diesel) has been a proven and substantial route by all the governments, whether the state governments or the central government," he said.

The current rally in fuel prices is because crude oil prices have touched USD 61 per barrel mark for the first time in more than a year.

Taxes make up for over 61 per cent of retail petrol price while they constitute more than 56 per cent of diesel pump rates.

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While the central government has raised excise duty, states too have raised VAT, the minister said. "So, both the states and the central government are raising taxes according to their developmental needs."

In the last 300 days, petrol and diesel prices have risen on 60 days. Rates were cut on 7 days for petrol and 21 in case of diesel. "For almost 250 days, we have neither increased nor decreased the price," he said. "So, it is a misnomer to campaign that prices are an all-time high."

The central government had reduced the excise duty on petrol and diesel by Rs 2 per litre on October 4, 2017, and again by Rs 1.5 on October 5, 2018, he said, adding on the Centre's request 18 states and one union territory had reduced VAT on the fuel at that time.

In October 2018 when excise duty was cut, petrol price in Delhi had touched Rs 84 per litre and diesel was at Rs 75.45. On Wednesday, petrol was priced at Rs 87.60 a litre in Delhi and diesel at Rs 77.73.

Rates vary from state to state depending on local taxes (VAT) and freight.