India in no mood to alter taxes on petro-fuels.

NEW DELHI : At a time when government is making all efforts to bring down inflation to the acceptable levels, fuel prices are one area which the government is not so willing to make policy adjustment to bring down prices.

On Thursday, August 05, 2010 the union minister of state for petroleum and natural gas, Jitin Prasad made it clear by saying that the government is in no mood to tamper fuel prices in any way. In a reply to a question if the central indirect taxes on petroleum fuel may be reduced to bring down peaking up prices, the minister maintained that the prices of petroleum products depend on several other factors and making changes in the rates of indirect taxes is not the sole method to achieve the objective of reducing retail price of petroleum fuels.

According to the statement submitted in the house by the ministry, the central taxes on petroleum fuels are in the form of customs and excise that includes three per cent education cess.

While petroleum fuels including petrol and diesel face customs duty of Rs.1.66 and Rs.1.82 per liter respectively, there is no central tax levied on kerosene for public distribution system (PDS) and domestic LPG, the government response said.

Excise on petrol and diesel is levied at the rate of Rs.14.78 and Rs. 4.74 per liter respectively. In addition, the state tax in the form of value added tax (VAT) is at the rate of Rs.8.57 and Rs.4.43 per liter of petrol and diesel respectively. The VAT on diesel is inclusive of Rs. 0.25 per liter of pollution cess. The state's VAT on PDS kerosene is Rs.0.59 per liter and nil on domestic LPG.

Thus, all these make retail selling prices of these fuels ( in Delhi) as costly as Rs. 51.45 per liter of petrol with Rs. 25.01 of the tax portion; Rs. 37.62 per liter of diesel with Rs. 10.99 of tax portion.

This translates into a huge portion of tax being paid by the consumer on fuel prices. A person buying petrol has to pay 48.61% of tax, while he pays 29.21 % as tax for purchase of diesel. Tax on PDS kerosene is however 4.79 % and nil on LPG cylinder.

Parimal Nathwani, Member of Parliament and the President (Corporate Affairs) of the Reliance Industries (BOM:500325) had raised the question in the upper house of the parliament about very high prices of the petroleum products due to high rates of taxes levied by both center and the states.

Source : commodityonline.com