Union Minister Nitin Gadkari told Lok Sabha that excise taxes on gasoline and diesel will be used for infrastructure and other development projects. He answered a question about the central government’s plans to cut taxes on petroleum products to reduce transportation costs.
“The excise duty rates on petroleum products have been calibrated to generate resources for infrastructure and other development expenditures, taking into account the prevailing budgetary situation,” said Gadkari.
Regarding the impact of fuel prices on the cost of freight, Gadkari said the logistic cost of transportation depends on various factors including the cost of capital of the vehicle, salaries, insurance, permit tax, maintenance, fuel, toll tax and other miscellaneous expenses.
Citing an advisor study by the Ministry of Roads and Transport, Gadkari stated that fuel consumption accounts for 34 percent of the vehicle’s total transportation cost.
As for the impact of the rise in fuel prices on transport costs for consumers, Gadkari said it depends on the transport companies. “Transport companies may or may not pass on the increased costs depending on the market situation or capacity to absorb additional costs etc.”
The prices for gasoline and diesel have been market-determined since June 26, 2010 and October 19, 2014, respectively. Since then, state oil marketing companies (OMCs) have set the prices for gasoline and diesel based on international crude oil prices and other market conditions.
According to a response presented by the Minister of State for Oil and Natural Gas Rameswar Teli in Lok Sabha on Monday, the central government has ₹$ 94,181 billion in excise taxes on gasoline and diesel in the first three months of the current tax bill due to a record tax on fuel. This led to an 88 percent increase in sales in the previous year.
The excise duty on gasoline was raised by ₹19.98 per liter to ₹32.9 last year, while the same for diesel was increased from ₹15.83 a liter to ₹31.8 to maintain profitability as international oil prices have plummeted to multi-year lows on demand stifled by the Covid-19 pandemic. This led to excise collections for gasoline and diesel that jump ₹3.35 lakh crore in 2020-21 (April 2020 to March 2021), from ₹1.78 lakh crore a year ago, Teli told the Lok Sabha.
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