With 76 Price Hikes on Fuel, Govt Collected 3.34 Lac Crore in Excise Duty Last Year

Government earnings from petrol and diesel have been at record breaking levels. And all of this is being funded by common citizens…

Fuel prices are at an all-time high in India. But do you know that a major chunk of the fuel cost actually consists of taxes…?

The Indian government has received a whopping sum of INR 3,34,894 crores only from the excise duty on petrol and diesel in the financial year of 2021. Further breaking it down, excise on Petrol was INR 1,01,598 crore and that of diesel was INR 2,33,296 crore.

The price of petrol was increased 76 times in this period whereas diesel saw 73 upward revisions. It must be noted that due to the pandemic and lockdowns, usage of automobiles was lesser.

The increase in taxation on petrol and diesel during mid-2020 led to the high amount of excise revenue. 

There was an initial hike of INR 3 in the excise duty on petrol from INR 19.98 to INR 22.98 around early last year. Within two months the taxes increased to INR 32.98, resulting in an overall increase of INR 13 per liter. 

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Even diesel saw a steady hike in the price over the last two financial years. Back in 2019, excise duty on Diesel was INR 15.83 per liter which rose to INR 18.83 in early 2020, further rising to INR 31.83. 

Government earnings from petrol

The Role of Taxation

The all-time high price of petrol includes taxes by the central government as well as by the state governments.

Close to 60 percent of the total price that a commuter is paying for his petrol is nothing but taxes. In simple terms if the retail price of petrol in your city is Rs 100, the actual price of petrol is only about Rs 35-40 and the rest of it is – TAXES!

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Recently, retail petrol price got hiked to INR 101.54 per liter. From that 32.40 percent is excise duty and 23 percent is State VAT. Even diesel is facing a similar fate with a state VAT of 14 percent and around 35 percent as excise duty. 

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It must be noted that international crude prices and dollar rates – which were once pushed as the major price deciders of retail fuel cost, have had remained relatively stable. In fact, few years back, crude prices were almost double of current rates, however, eventual price billed to the customer was lower, much lower!

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In fact, crude prices went to rock bottom levels for a brief period last year, however, there was no reduction in excise duties on fuel and we continued to pay the increasing prices.

Source – Autocar