The sixth straight hike in diesel and petrol price has made the car fuel 42.4% and 32.8% costlier in Mumbai and Delhi, respectively.
Petrol prices in India are raised for the sixth straight time, which has eventually soared the cost of necessities in human life. A litre of petrol now costs more than one of the costliest fuels in India, aviation turbine fuel or ATF.
ATF in Delhi costs 82,638.79 rupees per kilolitre, according to the Indian oil website. Therefore, a litre of ATF in Delhi would cost 82.6 rupees. A litre of petrol costs 109.69 rupees after a sixth straight hike of 35 paise in the national capital. The price hike was the result of the unrelenting increase in international crude prices. It had also pushed the pump to increase the petrol and diesel price to the first ever 110 rupees mark. Now, petrol is 32.8% costlier than ATF.
Petrol prices in Indian cities and towns
In Mumbai, petrol costs 115.50 rupees a litre, 42.4% higher than the ATF. ATF in the financial hub of India costs 81,050.70 rupees per kiloliter. Kolkata and Chennai also have similar stories as petrol prices increased to 110.15 rupees and 106.35 rupees, respectively. Petrol is pricier than ATF in Kolkata and Chennai by 27% and 25.1%.
Not only the metros but the Tier 1 and 2 cities witnessed a huge jump in fuel prices, affecting their cost of living. In a border town in Rajasthan, Sri Ganganagar, a litre of petrol costs 121.78 rupees, around 11 rupees more than the highest benchmark for petrol prices.
In West Bengal, Nadia district has the costliest petrol at 111.40 rupees a litre, up by 52 paise.
Diesel prices were also increased, and now it costs 98.42 rupees a litre in Delhi and 101.56 rupees in Kolkata. In Jaipur, a litre of diesel would cost 108.39 rupees, increased by 41 paise.
The reason behind cheaper ATF
After the hike, most of the Indians were thinking that it is cheaper to ride a plane in the city than petrol or diesel-run vehicles. But who is to be blamed for it! In India, the tax rate on Aviation Turbine Fuel (ATF), petrol and diesel determine their market price.
Modi and his finance minister have repeatedly said that taxes are increased or maintained to help roll government schemes for the poor. In any federal government, the money collected from the state and subjects is given back to its people as benefits, welfare schemes and others. Now, in any economic system, there are two kinds of taxes – Direct and Indirect taxes. India has arguably only one direct tax, the income tax. Indirect taxes are amounts collected by the government when an individual buys any particular product. The taxes levied on fuels are indirect taxes.
In India, ATF attracts central excise duty of 11% and a VAT (Value Added Tax) between zero and 30%. The Gujarat government has imposed the highest VAT of 30% on ATF, followed by 29% in Tamil Nadu. The central government has even urged the states to reduce the VAT to 4% to relieve the burden on airlines.
Contrarily, the central and state government taxes contribute nearly 60% and 54% of petrol and diesel price, respectively. The central government levies excise duties of 32.80 rupees per litre and 31.80 rupees on petrol and diesel.
For ATF, even at the highest possible tax rate structure, it would not contribute to half of the selling price. Apart from the central government’s freight charges and excise duties, car fuels also bear the variable state VATS and dealer commissions.
The hike in petrol prices affects both rich and poor, but the rich can bear the burnt. Thus, the government should stop the process of poor Indians funding their own welfare scheme. Taxes on luxury items, estates might be hiked as a compensatory measure.