Mumbai will be first metro to see diesel at Rs 100 due to high taxes

NEW DELHI: India's financial capital Mumbai is set to earn in a day or two the dubious distinction of becoming the first metropolis to see

diesel

hit century, as high state taxes amplify the impact of elevated crude.

Diesel price stood at Rs 99.92 a litre on Friday in Mumbai after the latest round of revision by retailers Since September 24. Going by the trend of price revisions by the retailers, the price is expected to hit the Rs 100-mark in a day or so.

Mumbai had on May 29 become the country’s first metro to see

petrol

hit a century as it taxes fuels the most among the ‘Big Four’.

While Rs 100 a litre price has become normal for petrol since February, diesel topped the Rs 100-mark on October 1 in several cities of Rajasthan, Madhya Pradesh, Odisha, Telengana and Andhra Pradesh – all states with high

VAT

. The price stood at Rs 106.03 a litre in Rajasthan’s Sriganganagar on Friday, the highest in the country.

High diesel prices will stoke inflation as it is mainly consumed by the transport, farm and construction sectors, which has a cascading effect. Politically, the record diesel prices may add to the anger of farmers, who are agitating against the Centre's farm laws, ahead of the crucial UP assembly poll.

Fuel prices

went on a record-breaking spree after a gap of 67 days since July 17 as retailers started raising pump prices after crude tested a three-year high of $80 a barrel last month.

While high crude prices are a factor, the real reason why consumers are paying through their nose is last year’s sharp increase in

Central

excise duty and VAT in states, which are amplifying the impact for consumers.

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.

The sharp increase in taxes pushed up the Centre’s tax collection from petrol and diesel in 2020-21 spiked 88% to more than Rs 3 lakh crore – a record led by a 108% jump in mop-up from diesel – in spite of lower sales due to the pandemic.