As gasoline and diesel prices rise to new levels, people are worried about what measures the government will take to control them: Mumbai gasoline prices exceed 86 rupees per liter and diesel prices exceed 75 rupees per liter. As far as gasoline and diesel are concerned, crude oil prices and exchange rates are not subject to government restrictions. In this case, according to the research report, the only option is still to lower taxes.
The CARE rating report states: “…There is almost nothing you can do to influence global prices. It depends on external factors. Currency is also beyond the government’s control and will depend on these two basic factors. As external forces. Options include central and state The government lowers consumption tax or sales tax, or subsidizes these products to ease price increases.
The reduction of special taxes or value-added tax (VAT) by the federal and state governments will result in reduced revenues. In July 2018, the consumption of gasoline and high-speed diesel was about 8,900 tons. Each liter of Re1 can reduce revenue by about 7-8,000 rupees per year.
The Indian crude oil basket is a combination of Oman, Dubai and Brent. The average price in July 2018 was approximately US$73.5 per barrel, which is multiplied by the recent depreciation exchange rate-71 rupees per US dollar. …In addition to commissions, distributors at the central and state levels have to determine the final price. The increase in fuel prices is mainly due to the country’s rising crude oil prices and high excise taxes. Its current value is more than US$78 per barrel. The recent depreciation of the rupee has also increased the cost of crude oil imports, leading to higher fuel prices.
The reduction of special taxes or value-added tax (VAT) by the federal and state governments will result in reduced revenues. In July 2018, the consumption of gasoline and fast diesel was around 8,900 tons. Each liter of Re1 can reduce revenue by about 7-8,000 rupees per year.
Petroleum and petroleum products are an important source of revenue for the central and state governments, because these taxes are freely disposable, and most products are not covered by the goods and services tax.
According to rating agencies, oil complexes are a very important source of revenue for the government. About 36% of the 8 million rupees in consumption tax, service tax and goods and services tax collected by the central government last year came from this complex. 20% of the government’s own tax revenue comes from these products, so both levels of government have shown greater interest in these products,” he added.
The central government’s consumption tax is approximately Rs 20 per liter of gasoline and Rs 15.25 per liter of diesel. The sales tax or sales tax on gasoline ranges from 16% in Goa to 38.5% to 39.5% in Maharashtra. It ranges from 22% to 25% in Maharashtra to 11.5% in Chandigarh. Since gasoline and diesel are not subject to goods and services taxes, there is no obligation to reduce these tax rates.
According to CARE Ratings, the price of these two products is interesting in that the final profit margin of gasoline is 100% of the price of gasoline, and the price of diesel is about two-thirds higher. “Of course, assuming that consumption is not constant, this also means that gasoline, which is still considered a luxury, has higher taxes than diesel.”
Rising crude oil prices affect the wholesale price index (WPI) and consumer price index (CPI) inflation. Gasoline and diesel together account for about 4.7% of WPI. In the CPI, changes in gasoline and diesel as well as financial derivatives such as transportation and air tickets directly affect about 3%. Over 78.80 rupees. A price increase of more than 10% means that the WPI in this ranking will increase by about 0.5% (assuming the same is true for diesel). For IPC (assuming that the prices of all derivatives have risen by 10%), the growth rate is 0.3%.”
As CPI and CPI inflation rates have risen, especially in the non-food sector, rising fuel prices will cause the Reserve Bank of India (RBI) to take action on fuel prices. 25 basis points (bp). However, will this be considered A preventive measure or cure for higher inflation remains to be speculated,” the rating agency concluded.