Runaway fuel prices wipe excise duty cut gains

Over the past fortnight, petrol and diesel have become dearer by ₹11

When the Centre slashed excise duty on petrol and diesel in early November last year, bringing much needed relief to consumers, it was perceived as a Diwali gift. The runaway fuel prices, however, have meant benefits of the gift started fading soon after Holi this year.

The benefits of ₹5-a-litre reduction in the levy was wiped out in a matter of few days once national oil companies resumed daily price revision, with effect from March 23, after a four and a half month hiatus. But for Assembly elections in five States, it could have happened much earlier as international crude oil prices had firmed up on the back of mounting tension between Russia and Ukraine.

In the case of diesel, on which excise duty was brought down by as much as ₹10 a litre, the benefits lingered on a little longer. Unlike in the BJP-ruled States as well as in Punjab, Delhi and Rajasthan, where the governments also subsequently reduced the VAT (value-added tax) on the fuel, there was little for consumers in Telangana. The State government kept the VAT rates unchanged.

Arguing it was not right on the part of the Centre to blame States for rising fuel prices, Minister K.T.Rama Rao, in an open letter on Wednesday, said Telangana government did not increase VAT.

With no signs of the Centre further reducing the excise duty and the State sticking to its stand, consumers may need to brace for more fuel price hikes, which also have a cascading impact on the cost of various other daily use items besides making commute expensive.

From March 23 to April 7, a litre of petrol in Hyderabad has become dearer by over ₹11, while diesel price increased nearly ₹11 in the same period.

Sources in Indian Oil Corporation and HPCL, however, report little impact on the consumption numbers. On the contrary, there has been an increase with consumers presumably tanking up earlier than before to save a few rupees. As on April 7, petrol per litre in Hyderabad came for ₹119.49 and diesel for ₹105.49.