How do India’s fuel taxes impact the less affluent?

The increase in both central and state taxes, the former more than the latter, is an important reason for the sharp hike in petrol and diesel prices. It is often believed that taxes on fuel affect the rich more than the poor, as the latter do not own vehicles. This view is supported by evidence from India’s latest (2011-12) Consumption Expenditure Survey (CES) findings and the 2015-16 National Family and Health Survey (NFHS). However, a 2014 survey for the petroleum ministry, conducted by Nielsen, questions these conclusions and suggests that the increased tax burden on petroleum products might burden the non-rich more than the rich.

1. NFHS and CES suggest that the poor do not suffer when petrol-diesel prices increase

According to the 2015-16 National Family and Health Survey (NFHS), only 6% of households in India owned a car or truck while the share of households owning a motorized two-wheeler is significantly higher, at 38%.