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Thursday, Aug 26, 2004

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Big chunk of fuel costs flows into Govt kitty

Raghuvir Srinivasan

Chennai , Aug. 25

YOU must be aware that taxes and duties are rather high on petrol and diesel in India. But did you know that more than half of what you pay for alitre of petrol and 25-40 per cent of what you pay per litre of diesel goes to the Government's kitty?

Last week's reductions in customs and excise duties notwithstanding, the Government (Union and State together) still appropriates Rs 23.55 per litre of petrol from a consumer in Mumbai, which has the highest selling price of Rs 42.11, and Rs 17.92 from a consumer in Delhi (selling price of Rs 36.81), one of the few places with a relatively lower tax structure.

Taxes take different forms. First is the 23 per cent excise duty, which is ad valorem (it will increase in absolute terms per litre as the basic price increases and vice versa) on petrol. It is 8 per cent in the case of diesel. Next is the additional excise duty of Rs 7.50 per litre of petrol and Rs 1.50 per litre of diesel. This includes the different cesses levied to raise funding for purposes such as road construction.

The third major tax component is levied by States as sales tax, which ranges from 30 per cent in Mumbai and Chennai to 20 per cent in Delhi for petrol. Consumers in Mumbai pay the highest sales tax for diesel at 34 per cent, while the ones in Delhi pay the lowest of 12 per cent. States such as Maharashtra and West Bengal also levy a surcharge that adds another Re 1 to the final price of petrol and diesel.

Fuel taxes in the US, which has one of the largest consumption levels in the world, are substantially lower compared to India. As per Energy Information Administration data, taxes account for just 21 per cent of the retail price of petrol and 28 per cent of that of diesel.

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