Govt rules out cutting taxes on petrol, diesel

State-owned OMCs dumped the 15-year old practice of revising rates on 1st and 16th of every month

Oil Minister Dharmendra Pradhan on Wednesday ruled out cutting taxes on petrol and diesel to cushion the impact of rising international oil prices that has led to petrol rates increasing by over Rs 6 per litre since the beginning of July.

State-owned oil companies in June dumped the 15-year old practice of revising rates on 1st and 16th of every month and instead adopted a dynamic daily price revision to instantly reflect changes in cost. Rates during the first fortnight dropped but have since July 3 been on the rise.

While petrol prices have increased by Rs 6.08 to reach Rs 69.12 a litre in Delhi, the highest since August 2014, diesel rates have risen by Rs 3.65 to Rs 57.01.

"That situation has not come where we should relook at tax structure," Pradhan told reporters on the sidelines of an industry event in New Delhi.

The rate changes are being done on a transparent basis and city-wise prices are available through SMS, he said adding the daily price change model best reflects the happenings in the market.

Asked if the government is considering cutting excise duty on petrol and diesel, he said, "Not yet. When situation arises, we will see."

The government had in November 2015 and January 2016 raised excise duty on petrol and diesel five times to take away gains arising from plummeting international oil prices. Excise duty on petrol was hiked by Rs 4.02 a litre and that on diesel by Rs 6.97.

Prior to that, the government had in four instalments raised the excise duty on petrol and diesel between November 2014 and January 2015 to take away gains arising from fall in international oil prices.

The four excise duty hikes during this period totalled Rs 7.75 per litre on petrol and Rs 6.50 a litre on diesel. It led to about Rs 20,000 crore in additional revenue to the government, helping it meet the fiscal deficit target.

In all, duty on petrol was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre.

Pradhan said his ministry was in favour of including petrol and diesel in the Goods and Services Tax (GST) regime, which kicked in from July 1.

Petrol, diesel, crude oil, aviation turbine fuel and natural gas have been kept out of the GST, which unifies over a dozen central and state levies like excise duty, service tax and VAT.

"We have been time and again requesting Ministry of Finance as well as states for inclusion of petroleum products in the GST regime," he said.

On the issue of equalising price of petrol and diesel by bringing tax rates at par, he said diesel is used as a fuel by transport and agriculture sector as also by SUVs. Petrol on the other hand is used in cars as well as two- and three- wheelers.

Equalising tax rates, which would mean raising price of diesel, would impact the transport sector thereby having a cascading effect on inflation, he said.