Centre mulling solution to deal with fuel prices, says Dharmendra Pradhan

Marcus Newton
May 28, 2018

The tax, which may come in form of a cess, will kick in the moment oil prices cross $70 per barrel, sources privy to the development said.

The price Brent crude oil, however, has declined around $3 per barrel in the last two days, which raises hopes of easing fuel prices in the country.

The revenues so raised would be paid to fuel retailers, allowing them to absorb spikes beyond the threshold levels, they said.

Pradhan asked the Odisha Government to cut the Value Added Tax (VAT) on petrol and diesel to provide relief to the people.

Bhamy V. Shenoy, who has been on the board of oil companies in Georgia besides being a consultant, contested the claims of former Union Finance Minister P. Chidambaram that petroleum prices can be reduced by ₹25 a litre. "The government is taking the matter of oil prices seriously". In 2011, the United Kingdom raised the tax rate on North Sea oil and gas profits when the price rose above $75 a barrel.

Rising global crude oil prices are largely behind the surge, but fuel is also heavily taxed by India's state and central authorities, accounting for about 40-50 percent of the retail cost of petrol and diesel.

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Road Transport and Highways Minister Nitin Gadkari on Friday said petrol and diesel should be brought under the Goods and Services Tax regime to curb the price hike.

Indications are that the windfall tax may continue for a substantial period of time or could be part of the government's long-term policy to deal with such situations in the future.

Since the time the hiatus ended on 14 May, rates have gone up by Rs2.84 a litre in case of petrol and Rs2.60 in diesel.

The Centre levies Rs19.48 as excise duty on a litre of petrol and Rs15.33 on diesel.

The union minister said the central government had in October a year ago reduced the excise on fuel by Rs 2 per litre keeping in view the interest of the poor people. State sales tax or VAT varies from state to state. As per the Raghuram Rajan Commitee report, Odisha was one of the least developed States when Congress led UPA Government was at the Centre for 10 en years.

Other reports by MaliBehiribAe

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