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Business

Petrol price soars to 4-year high, diesel at all-time high

businesstoday.in

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Petrol price on Sunday surged to its four-year high of Rs 73.73 a litre in Delhi, while the diesel rate soared to an all-time high of Rs 64.58, renewing calls for the government to cut excise tax rates on the fuels. The rates were raised by 18 paise a litre on both fuels by state-owned oil firms, which have been revising fuel rates on a daily basis since June.

The last time petrol rate was higher was in September 2014, when it touched Rs 76.06. The previous high for diesel price was on February 7, 2018, when it hit Rs 64.22.

Earlier this year, oil ministry sought a reduction in excise duty on petrol and diesel to cushion the impact of rising international oil rates.

However, the finance ministry has not reduced the rates. While retail inflation has been cooling down, the hike in fuel rates is likely to reverse that trend through a cost-push impact. It will affect inflation directly because commuters will have to pay more for petrol.

There will also be an indirect impact as cost of transporting goods will go up because of higher diesel prices. The surge in petrol prices also comes close to Reserve Bank of India’s monetary policy review meeting. The fuel price hike will reduce headroom for the RBI to cut interest rates to spur economic growth.

The RBI monetary policy committee will begin their meeting on April 4. India has the highest retail prices of petrol and diesel among South Asian nations as taxes account for half of the pump rates. Finance minister Arun Jaitley raised excise duty nine times between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre.

Following that excise duty reduction, the Centre had asked states to also lower VAT but just four of them –Maharashtra, Gujarat, Madhya Pradesh and Himachal Pradesh — reduced rates while others, including BJP-ruled ones, did not follow through.

The central government had cut excise duty by Rs 2 per litre in October 2017, when petrol price reached Rs 70.88 per litre in Delhi and diesel Rs 59.14. Because of the reduction in excise duty, diesel prices had on October 4, 2017 come down to Rs 56.89 per litre and petrol to Rs 68.38 per litre.

However, a global rally in crude prices pushed domestic fuel prices far higher than those levels The October 2017 excise duty cut cost the government Rs 26,000 crore in annual revenue and about Rs 13,000 crore during the remaining part of the current fiscal year.

The government had between November 2014 and January 2016 raised excise duty on petrol and diesel on nine occasions to take away gains arising from plummeting global oil prices. In all, duty on petrol rate was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months.

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