Parliamentary panel seeks duty cuts in petrol, diesel

NEW DELHI: With taxes making up more than half of the selling price of petrol and one-third of diesel, a parliamentary panel has asked the government to reduce rates
of duties and taxes on the two fuel.

About 53 per cent of the Rs 42.85 a litre selling price of petrol in Delhi is made up of central and state government taxes. For diesel, taxes and duties make up 31 per cent of the Rs 30.25 a litre price in Delhi.

The price of petrol without customs and excise duty and sales tax would have been been Rs 20.29 a litre while the price for diesel would have been Rs 21.01 a litre.

With such high incidence of taxation, the Parliamentary Standing Committee on Petroleum and Natural Gas, headed by N Janardhana Reddy, has demanded reduction in rates of duties and taxes on the two fuel.

"The government should go in for a comprehensive reform in the taxation on petrol products including the abolition of the ad valorem component in the taxes/duties," it said in its latest report tabled in Parliament last week.

The Committee found that even after the reduction of ad valorem component of excise duty on petrol and diesel from 8 to 6 per cent through the Union Budget 2007-08, the tax component in the retail selling price of petrol and diesel in Delhi was 53 per cent and 31 per cent respectively.

"Taxes and duties being levied on petroleum products are too steep which are resulting in higher retail prices of these products. More pinching is the ad valorem component in the excise duty which is putting additional burden on consumers," the report said.

Another cause of concern, according to the Committee, was the high and varied rates of sales tax or VAT in various states, leading to varied selling prices of petrol and diesel across the country.

Sales tax/VAT on petrol vary from 33 per cent in Andhra Pradesh to 18.16 per cent in Delhi and Haryana and 18.09 per cent in Manipur. On diesel, it is highest in Madhya Pradesh at 28.75 per cent and lowest in Punjab at 8.23 per cent.

Petrol attracts an ad valorem excise duty rate of 6 per cent plus a fixed rate of duty of Rs 5 a litre, while diesel has an 6 per cent ad valorem duty rate and Rs 1.25 per litre
fixed duty.

In the price build-up of petrol in Delhi, customs duty make for Rs 1.30 per litre (3 per cent), excise duty Rs 14.67 (34 per cent) and sales tax contributes to Rs 6.59 a litre (15 per cent). Similarly on diesel, customs duty builds up price by Rs 1.38 a litre (5 per cent), excise duty Rs 4.70 per litre (16 per cent) and sales tax Rs 3.16 a litre (10 per cent).