Fuels on fire, heat on government

Fuel prices rose for the 11th consecutive day on Thursday, as dealers continued to pass on the burden of increasing crude oil rates to customers in a staggered manner, spurring the Opposition to step up its attack on the government.

The Centre may levy a windfall tax on oil producers like Oil and Natural Gas Corp (ONGC) as part of a permanent solution it is working on. The tax, which may come in the form of a cess, will kick in the moment oil prices cross USD 70 per barrel, PTI reported.

Under the scheme, oil producers, who get paid international rates for the oil they produce from domestic fields, would have to part with any revenue they earn from prices crossing USD 70 per barrel mark. The revenues so collected would be used to pay fuel retailers so that they absorb spikes beyond the threshold levels, sources said.

This may be accompanied by a minor tinkering with excise duty rates to give immediate relief to consumers. States too would be asked to cut sales tax or VAT to show a visible impact on retail prices.

Fuel prices across metros increased by another 30 paise on Thursday with petrol breaching Rs 85 per litre mark in Mumbai at a retail price of Rs 85.29 a litre. In Delhi, petrol was Rs 77.47 per litre.

In Chennai, the price was Rs 80.42 and Rs 80.12 in Kolkata, according to Indian Oil Corp.

In the past one week, petrol prices have gone up over Rs 2 per litre across metros.

Diesel prices too rose by 30 paise on Thursday. Diesel was the most expensive in Mumbai at Rs 72.96 per litre, followed by Chennai at Rs 72.35 per litre, Kolkata at Rs 71.08 a litre and Delhi at 68.53 a litre.

Union Oil Minister Dharmendra Pradhan said that the Centre is deliberating on an "immediate solution" to control the prices. "The Oil Ministry is of the view to bring petroleum products under the purview of GST in order to bring down the prices of petrol and diesel. We are deliberating on an immediate solution to this problem till that time. We will certainly find a way out to deal with the situation," Pradhan said.

He said the central government had reduced excise on fuels by Rs 2 per litre in October last in the interest of the poor. "The Centre is now looking at both short- and long-term solutions," he said. He reiterated that global politics were behind the fuel price rise

In 2017, the government introduced the practice of daily price revision of fuel prices, which were previously fixed every fortnight based on the international crude price and the rupee's exchange rate.

The United Progressive Alliance government in 2010 deregulated the pricing of petrol. The National Democratic Alliance administration followed suit with diesel in 2014.

After a 19-day hiatus in run-up to Karnataka polls ended on May 14, price of petrol has increased by R2.84 a litre, and that of diesel by R2.60 in the last 11 days.

The Centre levies R19.48 excise duty on a litre of petrol and R15.33 on diesel. State sales tax or VAT varies from state to state. VAT is ad valorem and results in higher revenues for states when rates move up.

Experts say if fuel prices are brought under GST, the threshold will change, because, right now, taxes upon taxes are levied which increases rates. GST will ensure a single tax.

Consumers and opposition parties protesting because school bus drivers' unions, vegetable vendors, milk suppliers, taxi unions, auto-rickshaw drivers and restaurants also hiking prices of their services. (With inputs from agencies)