Union minister Nitin Gadkari told Lok Sabha that the excise duty collected from petrol and diesel is being used in infrastructure and other development projects. He was replying to a question on central government’s plans to reduce taxes levied on petroleum products to bring down the cost of transportation.
“The excise duty rates on petroleum products have been calibrated to generate resources for infrastructure and other development items of expenditure, keeping in view the prevalent fiscal situation,” Gadkari said.
Talking about the impact of fuel prices on freight costs, Gadkari said that the logistic cost of transportation depends on various factors, including capital cost of the vehicle, salaries, insurance, permit tax, maintenance, fuel, toll tax and other miscellaneous expenses.
Citing a study by the Ministry of Road and Transport through a consultant, Gadkari stated that the impact of fuel is 34 per cent of the total transport freight cost by the vehicle.
As for impact of rise in fuel prices on transport costs to consumers, Gadkari said it depends on the transport companies. “The transport companies may or may not pass the increased cost depending upon the market situation or capacity to absorb additional cost, etc.”
Petrol and diesel prices have been market-determined since June 26, 2010, and October 19, 2014, respectively. Since then, state-run oil marketing companies (OMCs) have been deciding the prices of petrol and diesel on the basis of international crude oil prices and other market conditions.
According to an answer presented by Minister of State for Petroleum and Natural Gas Rameswar Teli in the Lok Sabha on Monday, the central government has collected ₹94,181 crore through excise duty on petrol and diesel in the first three months of the current fiscal on the back of a record tax on transportation fuel. This generated 88 per cent higher revenue the previous financial year.
Excise duty on petrol was hiked from ₹19.98 per litre to ₹32.9 last year, while the same on diesel was raised from ₹15.83 a litre to ₹31.8, to maintain profitability amid international oil prices plunging to multi-year low on the back of demand stifled by Covid-19 pandemic. This led to excise collections on petrol and diesel jumping to ₹3.35 lakh crore in 2020-21 (April 2020 to March 2021), from ₹1.78 lakh crore a year back, Teli told the Lok Sabha.
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