The Government has made Petroleum Products a Milk Cow for Revenue

Lockdown connection behind the ever increasing price of petrol and diesel, Know the whole story
Image Credit: SAG Infotech Official Blog
Image Credit: SAG Infotech Official Blog

Petrol and diesel prices have increased on Friday for the 13th consecutive day. Petrol in Delhi has become Rs 78.37 a liter. This is when crude oil prices have continued to soften. After all, what is the helplessness of the government or companies; what is the lockdown connection behind this.

Image Credit:Republic World
Image Credit:Republic World

In the last 13 days, the price of diesel has increased by Rs 7.67 per liter and petrol price by Rs 7.09 per liter. A large part of these fuel prices are excise duty, or excise duty levied by the government.

The cost of crude oil for the Indian basket rose from $ 70 a barrel in January this year to $ 17 a barrel in April. Despite this, on 6 May 2020, the government increased the excise duty on petrol by Rs 10 and on diesel by Rs 13. Now the excise duty on branded petrol has reached Rs 44.16 a liter, while on branded high-speed diesel it has reached Rs 34.19 a liter. In addition to excise duty, VAT and custom duty of the states are also charged on petrol and diesel.

The government has benefited greatly from the fall in crude oil. Petrol and diesel prices fell by only 10 per cent, despite a 70 per cent drop in the cost of crude oil from 1 January to 4 May this year. After this, prices of petrol and diesel started rising. For the past 13 days, the prices of petrol and diesel have been steadily increasing. In May, the cost of the Indian basket of crude oil doubled to $ 40 per barrel in a week.

How is the government making up for the loss caused by lock down?

Image Credit:First Post
Image Credit:First Post

The government's treasury was emptied due to the lockdown. In such a situation, petrol-diesel was the only source from which they could collect good revenue. GST and direct tax collections have fallen drastically due to Corona lockdown. The central GST collection in April was just Rs 6,000 crore, while the CGST collection was Rs 47,000 crore a year ago. So the government wants to compensate this loss by increasing the tax on petrol and diesel. According to Subhash Chandra Garg, former secretary of economic affairs in the finance ministry, the government wants to get more revenue from petroleum. He said, "When the government increased the excise duty, the prices of crude oil were at a very low level and the petroleum companies were making some profit. The decline in crude oil is seen as an opportunity to increase revenue".

Now why the prices of petrol and diesel are increasing?

Image Credit: This Day Live
Image Credit: This Day Live

In fact, when the prices of crude oil were very soft, the government increased their prices by increasing taxes heavily. Petroleum companies have not benefited from this. Now, when the cost of crude oil has doubled in a month, then petroleum companies have to increase their prices continuously to maintain their profit. When the price of crude oil reached above $ 34-35, then the challenge started increasing and the prices of petroleum products had to increase. But these prices of crude oil are half as compared to a year ago, so questions were raised on increasing the prices.

Government made Petroleum a milk cow

Image Credit:The African Official Blog
Image Credit:The African Official Blog

In the last five years, the government's revenue from petroleum has increased more than double. The average price of crude oil in 2019-20 was $ 60.47 per barrel. During this time, the government earned revenue of Rs 2.23 lakh crore from excise duty on petroleum products, which is more than double of 99,000 crore in 2014-15.

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