The steep hikes on auto fuel taxes – Rs 10/litre on petrol and Rs 13/litre on diesel – announced by the Centre late Tuesday won’t inflate the retail prices of these fuels immediately, as the oil marketing companies (OMCs) would for the time being adjust the extra cost against the recent fall in oil prices. The OMCs have over the last few months been seizing the opportunity afforded by the softening of crude prices to prop up their marketing margins.
For the Centre, the move could fetch a whopping Rs 1.4 lakh crore additional revenue annually, even with the estimated 12% fall in consumption of the two auto fuels in FY21. The states would get some Rs 20,000 crore of the extra Central revenue, given that part of the duty hikes are in the shareable pool; the states would also get a few thousand crores extra due to the expansion of the base their taxes (VAT/sales tax) apply.
