India is reeling under the highest price of fuel ever. While the international price of crude oil is stable, the higher tax collection on the fuel has raised the cost for consumers. Union Finance Minister Nirmala Sitharaman on Monday ruled out a price cut for petrol and diesel.
The minister said there is no possibility to cut down the excise duty on the fuel prices to bring down the all-time high prices. She blamed it on the payments in lieu of past subsided fuel prices by the previous governments.
Fuel like petrol, diesel, LPG, kerosene and more was sold at subsidies rates during the Congress-led UPA government. The previous government did not pay the subsidy cost between the reduced retail price and the cost of the fuel in the international market. The price per barrel of crude oil had crossed USD 100 and the government covered the difference by issuing bonds totalling Rs 1.34 lakh crore to the state-fuel retailers.
The oil bonds and the interest amount is thereon being paid by the governments including the current BJP-led NDA government. Sitharam said,
“If I did not have the burden to service the oil bonds, I would have been in a position to reduce excise duty on fuel. Previous governments have made our job difficult by issuing oil bonds. Even if I want to do something I am paying through my nose for the oil bonds.”
The government is paying interest
Nirmala Sitharam had raised the excise duty on petrol and diesel to a record high. This caused the revenue collection to soar up last year too. Sitharam said that the current government has paid Rs 70,195.72 crore as interest on the oil bonds in the last seven years.
However, our a total of Rs 1.34 lakh crore of oil bonds, only Rs 3,500 crore of the principal amount has been paid. The remaining Rs 1.3 lakh crore is due for repayment between now and 2025-26. The union government has to repay Rs 10,000 crore this fiscal year and another Rs 31,150 crore in repayments in Rs 2023. Another Rs 52,860.17 core in 2024 and the last instalment of Rs 36,913 crore in 2025-26.
She claimed that it is an unfair burden on her as she has to pay a significant amount of interest and principal amount on the oil bonds.
Collections have crossed the amount due
The government hiked the excise duty from Rs 19.98 to Rs 32.9 last year as the prices of crude oil in the international market was plunging down due to the pandemic. The price of crude oil broke the low of multiple years due to the falling demand as most countries around the world went on lockdown.
Rameshwar Teli, Minister of State for Petroleum and Natural Gas told the Parliament that the central government’s tax collection on petrol and diesel has jumped by 88 percent to Rs 3.35 lakh crore in the year from Rs 1.78 lakh crore a year back. One should note that as per Business Standard, Excise Duty collection in the pre-pandemic 2018-19 was Rs 2.13 lakh crore.
With the lockdown opening and the demand for oil rising internationally, the price is increasing and that has caused the retail price of fuel in India to break all the previous records.