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Petrol tax slashed, but you aren’t getting full relief


NEW DELHI:  Consumers were in for a shock on Sunday as the reduction in petrol prices thanks to the excise duty cut was lower than they had thought. Vehicle users in Delhi were expecting Rs 9.50 cut in petrol prices but the reduction was only Rs 8.69. Consumers in other cities also had to shell out more than expected. Reason: the state-owned oil marketing companies (OMCs) raised the base price of petrol overnight, which jacked up the net retail price.

OMCs update the base price as and when backend crude and refining prices change. According to the price notification of OMCs, the oil companies increased the base price on petrol by 58 paise, making petrol almost Rs 1 dearer. Following the hike in base price, the petrol costs Rs 96.72 per litre in Delhi, instead of Rs 95.91 per litre. It means people in Delhi were paying 81 paise per litre more at petrol pumps. 

Finance Minister Nirmala Sitharaman had on Saturday announced slashing the Central excise duty on petrol by Rs 8 per litre and Rs 6 per litre on diesel. She claimed it would reduce the price of petrol by Rs 9.5 per litre and of diesel by Rs 7 per litre in Delhi. 

After confusion prevailed among consumers in Kerala on the real impact of the excise duty cut on fuel prices, the state’s finance minister K N Balagopal clarified that consumers in the state should have got a price reduction of Rs 10.41 following the 8 cut in excise duty and the Rs 2.41 reduction in state tax but the unexpected base price shrank the benefit to Rs 9.40. 

Base price may be changed on a daily basis or less frequently as the OMCs prefer, said Gaurav Moda, India Energy Leader, EY. The final price comprises base price, central excise, dealers’ commission and state VAT. Some taxes are absolute (like Central excise), some are levied as a percentage of the base price. So, the exact price reduction may vary from state to state.

There is no such issue in the case of diesel.

‘Price benefits could be wiped out in a month’ 
The benefits of the excise duty cut would be lost in a month if the Centre allows fuel prices to be hiked like this, warned Kerala finance minister K N Balagopal