Petrol in Maharashtra now costliest in India

With petrol prices being reduced for the second time in this month, motorists should be a happier lot. But those tanking up on petrol in the state of Maharashtra have little to cheer about.

Following the price cut of Rs 2.16 per litre of petrol by oil marketing companies (OMCs) from the midnight of May 15-16, the price of petrol in Mumbai stood revised to Rs 74.72 in Mumbai. However, the Maharashtra government decided to increase the value added tax (VAT) surcharge by around Rs 2 from May 17, effectively hiking petrol prices to Rs 76.76 per litre in Mumbai, Thane and Navi Mumbai and to Rs 77.52 in Pune, making the fuel in the state the costliest in the country. Incidentally, surcharge on diesel prices have not been revised.

VAT’s the issue?
The Maharashtra state government had earlier increased the surcharge collected along with VAT on April 21, from Rs 6 to Rs 9 (VAT 26% plus Rs 9) to which a drought levy of Rs 3 was added, making petrol prices in Mumbai and Pune the highest in the country.

With the latest hike, the surcharge has increased to Rs 11 (VAT 26% plus Rs 11). Petrol station owners, who had earlier planned to protest for increasing their commission on May 14 and single-shift operations, thereafter deferred their plans and would continue to operate while discussions on hiking of dealer commission continue with the state government.

Finance officials have estimated loss of revenue for Maharashtra government to the tune of Rs 850 crore if VAT had not been increased. To avoid such a loss, the state government immediately raised the VAT surcharge. Maharashtra retailers sell about 320 crore litres of petrol annually, making taxes on fuel one of the biggest revenue earners for the government. 

Taxes on petrol and diesel, which constitute a significant part of the final cost to the consumer, are seen to be around 70 percent above the cost of refined crude oil.

Depending on global crude oil prices and the rupee-dollar exchange rate, OMCs typically revise fuel prices across the country every fortnight and every day in select 5 cities. Crude oil prices have seen a correction due to oversupply and improved crude inventories, even while top producers Saudi Arabia and Russia have cut their production.

India, in its efforts to keep fuel price volatility in check, has also taken a slew of steps. Iraq has become its top source of export for crude supply due to its cheaper fuel price and physical properties replacing Saudi Arabia.