Mumbai first metro to see petrol at Rs 100 due to high taxes

NEW DELHI: India's financial capital Mumbai on Saturday earned the dubious distinction of becoming the country’s first metropolis to see regular petrol selling for more than Rs 100 a litre as retailers jacked up prices for the 15^th time this month.
The latest increase saw several other districts in the state joining the ranks of Thane, which was the first in Maharashtra to see petrol slamming a century on Thursday.
Petrol price is hitting a new record after every upward revision and ruling above Rs 93 per litre in most other states. Diesel prices too are scaling new peak, ruling above Rs 80 in most states and at Rs 92 a litre in Mumbai.
Retailers are raising pump prices because crude is flirting with $70 a barrel. Simultaneously, the rupee has also weakened. But still, these have much less to do with pump prices of petrol hitting Rs 100 a litre. The real reason is last year’s sharp increase in Central excise duty and VAT in states. These are amplifying the impact of every small revision in prices.
On May 29, 2019, petrol cost Rs 73.83 a litre in Delhi, the reference market, and Rs 77.47 in Mumbai on May 29, 2019 when India’s crude cost averaged $70 a barrel. Today, Indian refiners pay $66 for each barrel they buy but petrol is selling at Rs 93.94 a litre in Delhi and Rs 100.19 in Mumbai.
If one leaves aside the rupee-dollar exchange rate for a moment, it becomes clear that consumers are paying through their nose because of high taxes. For example, excise duty on petrol stood at Rs 19.98 a litre in May 2019 but today it is Rs 32.98. States are equally to blame as they have jacked up VAT every time the Centre raised excise duty.
The Centre raised excise duty by Rs 13 on petrol and Rs 16 on diesel between March and May last year when oil prices collapsed due to the pandemic. The two hikes raised excise duty 65% on petrol from Rs 19.98 to Rs 32.98 a litre and 79% on diesel from Rs 15.83 to Rs 28.35. VAT is levied as a percentage and rises each time the base cost goes up.
This explains why the pinch is harder for consumers in Maharashtra, Madhya Pradesh and Rajasthan, all of which have high VAT. Rajasthan has the highest VAT on fuels in the country. No wonder petrol price had crossed Rs 100 for the first time in the country in Rajasthan’s Sri Ganganagar district on February 17. Madhya Pradesh was next. Petrol has been selling for Rs 100 in both Jaipur and Bhopal days before Mumbai. Jaipur and Bhopal are the two other state capitals where petrol price has topped Rs 100.
Pump prices had remained static between February 28 and May 3 when the retailers paused revisions during electioneering in five states, even though crude hit $70/barrel during this period. Crude is currently hovering around $68, boosted by demand from the US, western Europe and China.