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In the past few months, retail prices of petrol and diesel have consistently increased to all-time high levels. On October 16, 2021, the retail price of petrol in Delhi was Rs 105.5 per litre, and that of diesel was Rs 94.2 per litre. In Mumbai, these prices were even higher at Rs 111.7 per litre and Rs 102.5 per litre, respectively.
The difference in fuel retail prices in the two cities is due to the different tax rates levied by the respective state governments on the same products. In this blog post, we look at the tax components in the price structure of petrol and diesel, the variation in these across states, and the major changes in taxation of these products in the recent years. We also discuss changes in the retail prices over the past few years and how it compares vis-à-vis the global crude oil prices.
Taxes make up around 50% of the retail price
Public sector Oil Marketing Companies (OMCs) revise the retail prices of petrol and diesel in India on a daily basis, according to changes in the price of global crude oil. The price charged to dealers includes the base price set by OMCs and the freight price. As on October 16, 2021, the price charged to dealers makes up 42% of the retail price in the case of petrol, and 49% of the retail price in the case of diesel (Table 1).
The break-up of retail prices of petrol and diesel in Delhi (as on October 16, 2021), shows that around 54% of the retail price of petrol comprises central and states taxes. In the case of diesel, this is close to 49%. The central government taxes the production of petroleum products, while states tax their sale. The central government levies an excise duty of Rs 32.9 per litre on petrol and Rs 31.8 per litre on diesel. These make up 31% and 34% of the current retail prices of petrol and diesel, respectively.
Table 1: Break-up of petrol and diesel retail prices in Delhi (as on October 16, 2021)
|
Component |
Petrol |
Diesel |
||
|
Rs/litre |
% of retail price |
Rs/litre |
% of retail price |
|
|
Price Charged to Dealers |
44.4 |
42% |
46.0 |
49% |
|
Excise Duty (levied by centre) |
32.9 |
31% |
31.8 |
34% |
|
Dealer Commission (average) |
3.9 |
4% |
2.6 |
3% |
|
Sales Tax/ VAT (levied by state) |
24.3 |
23% |
13.8 |
15% |
|
Retail Price |
105.5 |
100% |
94.2 |
100% |
Note: Delhi levies 30% VAT on petrol and 16.75% VAT on diesel.
Sources: Indian Oil Corporation Limited; PRS.
While excise duty rates are uniform across the country, states levy sales tax/ Value Added Tax (VAT) which varies across states. For instance, Odisha levies 32% VAT on petrol, while Uttar Pradesh levies 26.8% VAT or Rs 18.74 per litre, whichever is higher. Refer to the table 3 in annexure for sales taxes/VAT levied across the country. The figure below shows the different tax rates levied by states on petrol and diesel. In addition to the tax rates shown in the graph, many state governments, such as Tamil Nadu, also levy certain additional levies such as cess (Rs 11.5 per litre).
Figure 1: Sales tax/VAT rates levied by states on petrol and diesel (as on October 1, 2021)
Note: The rates shown for Maharashtra are averages of the rates levied in the Mumbai-Thane region and in the rest of the state. Only percentages are being shown in this graph.
Sources: Petroleum Planning and Analysis Cell, Ministry of Petroleum and Natural Gas; PRS.
Note that unlike excise duty, sales tax is an ad valorem tax, i.e., it does not have a fixed value, and is charged as a percentage of the price of the product. This implies that while the value of excise duty component of the price structure is fixed, the value of the sales tax component is dependent on the other three components, i.e., price charged to dealers, dealer commission, and excise duty.
Retail prices in India compared to global crude oil price
India’s dependence on imports for consumption of petroleum products has increased over the years. For instance, in 1998-99, net imports of petroleum products were 69% of the total consumption, which increased to around 95% in 2020-21. Because of a large share of imports in the domestic consumption, any change in the global price of crude oil has a significant impact on the domestic prices of petroleum products. The two figures below show the trend in the price of global crude oil and retail prices of petrol and diesel in India, over the last nine years.
Figure 2: Trend of the global crude oil price vis-à-vis retail prices of petrol and diesel (in Delhi)
Note: Global Crude Oil Price is for the Indian basket. Petrol and diesel retail prices are for Delhi. Figures reflect average monthly price.
Sources: Petroleum Planning and Analysis Cell, Ministry of Petroleum and Natural Gas; PRS.
Between June 2014 and October 2018, the retail selling prices did not adhere to change in global crude oil prices. The global prices fell sharply between June 2014 and January 2016, and then subsequently increased between February 2016 and October 2018. However, the retail selling prices remained stable during the entire period. This disparity in the change in global and Indian retail prices was because of the subsequent changes in taxes. For instance, central taxes were increased by Rs 11 and 13 between June 2014 and January 2016 on petrol and diesel respectively. Subsequently, taxes were decreased by four rupees between February 2016 and October 2018 for petrol and diesel. Similarly, during January-April 2020, following a sharp decline of 69% in the global crude oil prices, the central government increased the excise duty on petrol and diesel by Rs 10 per litre and Rs 13 per litre, respectively in May 2020.
Sharp increase in excise duty collections
As a result of the increase in excise duty in May 2020, the excise duty collection increased sharply from Rs 2.38 lakh crore in 2019-20 to Rs 3.84 lakh crore in 2020-21. The year-on-year growth rate of excise duty collection increased from 4% in 2019-20 to 67% in 2020-21. However, sales tax collections (from petroleum products) during that period remained more or less constant (Figure 3).
Figure 3: Excise duty and sales tax/ VAT collection from petroleum products (in Rs lakh crore)
Note: The excise duty component in the figure includes cess on crude oil.
Sources: Petroleum Planning and Analysis Cell, Ministry of Petroleum and Natural Gas; PRS.
Share of states in excise duty has decreased over the years
Though central taxes (such as excise duty) are levied by the centre, it has only 59% of the revenue from these taxes. The remaining 41% of the revenue is required to be devolved to the state governments as per the recommendations of the 15th Finance Commission. These devolved taxes are un-tied in nature, states can spend them according to their own discretion. The excise duty levied on petrol and diesel consists of two broad components: (i) tax component (i.e., basic excise duty), and (ii) cess and surcharge component. Of this, only the revenue generated from the tax component is devolved to states. Revenue generated by the centre from any cess or surcharge is not devolved to states. Currently, the Agriculture Infrastructure and Development Cess, and the Road and Infrastructure Cess are levied on the sale of petrol and diesel in addition to the surcharge.
In the Union Budget 2021-22, the Agriculture Infrastructure and Development cess on petrol and diesel was announced at Rs 2.5 per litre and Rs 4 per litre, respectively. However, simultaneously, the basic excise duty and surcharge were reduced by equal amounts, so that the overall rate remains the same. Essentially, this provision shifted a revenue of Rs 1.5 per litre of petrol and Rs 3 per litre of diesel from the states’ divisible pool of taxes to the cess and surcharge revenue, which is entirely with the centre. Similarly, over the last four years, the share of tax component in the excise duty has decreased by 40% in petrol and 59% in diesel (table 2). At present, majority of the excise duty levied on petrol (96%) and diesel (94%) is in the form of cess and surcharge, due to which it is entirely under the centre’s share (Table 2).
Table 2: Break up of excise duty (Rs per litre)
|
Excise duty |
Petrol |
Diesel |
||||||
|
Apr-17 |
% share of total |
Feb-21 |
% share |
Apr-17 |
% share of total |
Feb-21 |
% share |
|
|
Tax (devolved to states) |
9.48 |
44% |
1.4 |
4% |
11.33 |
65% |
1.8 |
6% |
|
Cess and surcharge (centre) |
12 |
56% |
31.5 |
96% |
6 |
35% |
30 |
94% |
|
Total |
21.48 |
100% |
32.9 |
100% |
17.33 |
100% |
31.8 |
100% |
Sources: Petroleum Planning and Analysis Cell, Ministry of Petroleum and Natural Gas; PRS
As a result, the devolution to states out of the excise duty has declined over the last four years. Even though the excise duty collections have increased sharply between 2019-20 and 2020-21, the devolved component has declined from Rs 26,464 to Rs 19,578 (revised estimate) in the same period.
Annexure
Table 3: Sales taxes/VAT rates levied on petrol and diesel across states (as on October 1, 2021)
|
State/UT |
Petrol |
Diesel |
|
Andaman & Nicobar Islands |
6% |
6% |
|
Andhra Pradesh |
31% VAT + Rs.4/litre VAT+Rs.1/litre Road Development Cess an d Vat thereon |
22.25% VAT + Rs.4/litre VAT+Rs.1/litre Road Development Cess and Vat thereon |
|
Arunachal Pradesh |
20% |
13% |
|
Assam |
32.66% or Rs.22.63 per litre whichever is higher as VAT minus Rebate of Rs.5 per Litre |
23.66% or Rs.17.45 per litre whichever is higher as VAT minus Rebate of Rs.5 per Litre |
|
Bihar |
26% or Rs 16.65/Litre whichever is higher (30% Surcharge on VAT as irrecoverable tax) |
19% or Rs 12.33/Litre whichever is higher (30% Surcharge on VAT as irrecoverable tax) |
|
Chandigarh |
Rs.10/KL cess +22.45% or Rs.12.58/Litre whichever is higher |
Rs.10/KL cess + 14.02% or Rs.7.63/Litre whichever is higher |
|
Chhattisgarh |
25% VAT + Rs.2/litre VAT |
25% VAT + Rs.1/litre VAT |
|
Dadra and Nagar Haveli and Daman and Diu |
20% VAT |
20% VAT |
|
Delhi |
30% VAT |
Rs.250/KL air ambience charges + 16.75% VAT |
|
Goa |
27% VAT + 0.5% Green cess |
23% VAT + 0.5% Green cess |
|
Gujarat |
20.1% VAT+ 4% Cess on Town Rate & VAT |
20.2% VAT + 4 % Cess on Town Rate & VAT |
|
Haryana |
25% or Rs.15.62/litre whichever is higher as VAT+5% additional tax on VAT |
16.40% VAT or Rs.10.08/litre whichever is higher as VAT+5% additional tax on VAT |
|
Himachal Pradesh |
25% or Rs 15.50/Litre- whichever is higher |
14% or Rs 9.00/Litre- whichever is higher |
|
Jammu & Kashmir |
24% MST+ Rs.5/Litre employment cess, Reduction of Rs.0.50/Litre |
16% MST+ Rs.1.50/Litre employment cess |
|
Jharkhand |
22% on the sale price or Rs. 17.00 per litre , which ever is higher + Cess of Rs 1.00 per Ltr |
22% on the sale price or Rs. 12.50 per litre , which ever is higher + Cess of Rs 1.00 per Ltr |
|
Karnataka |
35% sales tax |
24% sales tax |
|
Kerala |
30.08% sales tax+ Rs.1/litre additional sales tax + 1% cess |
22.76% sales tax+ Rs.1/litre additional sales tax + 1% cess |
|
Ladakh |
24% MST+ Rs.5/Litre employment cess, Reduction of Rs.2.5/Litre |
16% MST+ Rs.1/Litre employment cess , Reduction of Rs.0.50/Litre |
|
Lakshadweep |
Nil |
Nil |
|
Madhya Pradesh |
33 % VAT + Rs.4.5/litre VAT+1%Cess |
23% VAT+ Rs.3/litre VAT+1% Cess |
|
Maharashtra – Mumbai, Thane , Navi Mumbai, Amravati & Aurangabad |
26% VAT+ Rs.10.12/Litre additional tax |
24% VAT+ Rs.3.00/Litre additional tax |
|
Maharashtra (Rest of State) |
25% VAT+ Rs.10.12/Litre additional tax |
21% VAT+ Rs.3.00/Litre additional tax |
|
Manipur |
32% VAT |
18% VAT |
|
Meghalaya |
20% or Rs15.00/Litre- whichever is higher (Rs.0.10/Litre pollution surcharge) |
12% or Rs9.00/Litre- whichever is higher (Rs.0.10/Litre pollution surcharge) |
|
Mizoram |
25% VAT |
14.5% VAT |
|
Nagaland |
25% VAT or Rs. 16.04/litre whichever is higher +5% surcharge + Rs.2.00/Litre as road maintenance cess |
16.50% VAT or Rs. 10.51/litre whichever is higher +5% surcharge + Rs.2.00/Litre as road maintenance cess |
|
Odisha |
32% VAT |
28% VAT |
|
Puducherry |
23% VAT |
17.75% VAT |
|
Punjab |
Rs.2050/KL (cess)+ Rs.0.10 per Litre (Urban Transport Fund) + 0.25 per Litre (Special Infrastructure Development Fee)+24.79% VAT+10% additional tax on VAT |
Rs.1050/KL (cess) + Rs.0.10 per Litre (Urban Transport Fund) +0.25 per Litre (Special Infrastructure Development Fee) + 15.94% VAT+10% additional tax on VAT |
|
Rajasthan |
36% VAT+Rs 1500/KL road development cess |
26% VAT+ Rs.1750/KL road development cess |
|
Sikkim |
25.25% VAT+ Rs.3000/KL cess |
14.75% VAT + Rs.2500/KL cess |
|
Tamil Nadu |
13% + Rs.11.52 per litre |
11% + Rs.9.62 per litre |
|
Telangana |
35.20% VAT |
27% VAT |
|
Tripura |
25% VAT+ 3% Tripura Road Development Cess |
16.50% VAT+ 3% Tripura Road Development Cess |
|
Uttar Pradesh |
26.80% or Rs 18.74/Litre whichever is higher |
17.48% or Rs 10.41/Litre whichever is higher |
|
Uttarakhand |
25% or Rs 19 Per Ltr whichever is greater |
17.48% or Rs Rs 10.41 Per Ltr whichever is greater |
|
West Bengal |
25% or Rs.13.12/litre whichever is higher as sales tax+ Rs.1000/KL cess – Rs 1000/KL sales tax rebate (20% Additional tax on VAT as irrecoverable tax) |
17% or Rs.7.70/litre whichever is higher as sales tax + Rs 1000/KL cess – Rs 1000/KL sales tax rebate (20% Additional tax on VAT as irrecoverable tax) |
Sources: Petroleum Planning and Analysis Cell, Ministry of Petroleum and Natural Gas; PRS.
On October 2, 2021, Swachh Bharat Mission (SBM) celebrates its seventh anniversary. It was launched on October 2, 2014 to fulfil the vision of a cleaner India by October 2, 2019. The objective of the Mission was to eliminate open defecation, eradicate manual scavenging, and promote scientific solid waste management. In this blog post, we discuss the sanitation coverage leading up to the launch of the Swachh Bharat Mission and the progress made under this scheme.
Nation-wide sanitation programmes in past
According to the Census, the rural sanitation coverage in India was only 1% in 1981.
The first nationwide programme with a focus on sanitation was the Central Rural Sanitation Programme (CRSP), which was started in 1986 to provide sanitation facilities in rural areas. Later, in 1999, CRSP was restructured and launched as the Total Sanitation Campaign (TSC). While CRSP was a supply-driven infrastructure-oriented programme based on subsidy, TSC was a demand-driven, community-led, project-based programme organised around the district as the unit.
By 2001, only 22% of the rural families had access to toilets. It increased further to 32.7% by 2011. In 2012, TSC was revamped as Nirmal Bharat Abhiyan (NBA) to accelerate the sanitation coverage in rural areas through saturation approach and by enhancing incentives for Individual Household Latrines (IHHL).
In comparison to rural sanitation, fewer programmes were enacted to tackle deficiencies in urban sanitation. In the 1980s, the Integrated Low-Cost Sanitation Scheme provided subsidies for households to build low-cost toilets. Additionally, the National Slum Development Project and its replacement programme, the Valmiki Ambedkar Awas Yojana launched in 2001, were programmes that aimed to construct community toilets for slum populations. In 2008, the National Urban Sanitation Policy (NUSP) was announced to manage human excreta and associated public health and environmental impacts.
On October 2, 2014, the Swachh Bharat Mission was launched with two components: Swachh Bharat Mission (Gramin) and Swachh Bharat Mission (Urban), to focus on rural and urban sanitation, respectively. While the rural component of the Mission is implemented under the Department of Drinking Water and Sanitation, the urban one is implemented by the Ministry of Housing and Urban Affairs. In 2015, the Sub-Group of Chief Ministers on Swachh Bharat Abhiyaan under NITI Aayog had observed that the key difference between SBM and previous programmes was in the efforts to attract more partners to supplement public sector investment towards sanitation.
Swachh Bharat Mission – Gramin (SBM-Gramin)
The Sub-Group of Chief Ministers (2015) had noted that more than half of India’s 25 crore households do not have access to toilets close to places where they live. Notably, during the 2015-19 period, a major portion of expenditure under the Department of Drinking Water and Sanitation was towards SBM-Gramin (see Figure 1).
Figure 1: Expenditure on Swachh Bharat Mission-Gramin during 2014-22
Note: Values for 2020-21 are revised estimates and 2021-22 are budget estimates. Expenditure before 2019-20 were from the erstwhile Ministry of Drinking Water and Sanitation.
Sources: Union Budgets 2014-15 to 2021-22; PRS.
The expenditure towards Swachh Bharat – Gramin saw a steady increase from 2014-15 (Rs 2,841 crore) to 2017-18 (Rs 16,888 crore) and a decrease in the subsequent years. Moreover, during 2015-18, the expenditure of the scheme exceeded the budgeted amount by more than 10%. However, every year since 2018-19, there has been some under-utilisation of the allocated amount.
As per the Department of Drinking Water and Sanitation, 43.8% of the rural households had access to toilets in 2014-15, which increased to 100% in 2019-20 (see Figure 2). However, the 15th Finance Commission (2020) noted that the practice of open defecation is still prevalent, despite access to toilets and highlighted that there is a need to sustain the behavioural change of people for using toilets. The Standing Committee on Rural Development raised a similar concern in 2018, noting that “even a village with 100% household toilets cannot be declared open defecation-free (ODF) till all the inhabitants start using them”. The Standing Committee also raised questions over the construction quality of toilets and observed that the government is counting non-functional toilets, leading to inflated data.
Figure 2: Toilet coverage for rural households
Sources: Dashboard of SBM (Gramin), Ministry of Jal Shakti; PRS.
The 15th Finance Commission also noted that the scheme only provides financial incentives to construct latrines to households below the poverty line (BPL) and selected households above the poverty line. It highlighted that there are considerable exclusion errors in finding BPL households and recommended the universalisation of the scheme to achieve 100% ODF status.
In March 2020, the Department of Drinking Water and Sanitation launched Phase II of SBM-Gramin which will focus on ODF Plus, and will be implemented from 2020-21 to 2024-25 with an outlay of Rs 1.41 lakh crore. ODF Plus includes sustaining the ODF status, and solid and liquid waste management. Specifically, it will ensure that effective solid and liquid waste management is instituted in every Gram Panchayat of the country.
Swachh Bharat Mission – Urban (SBM-Urban)
SBM-Urban aims at making urban India free from open defecation and achieving 100% scientific management of municipal solid waste in 4,000+ towns in the country. One of its targets was the construction of 66 lakh individual household toilets (IHHLs) by October 2, 2019. However, this target was then lowered to 59 lakh IHHLS by 2019. This target was achieved by 2020 (see Table 1).
Table 1: Toilet construction under Swachh Bharat Mission-Urban (as of December 30, 2020)
|
Targets |
Original Target |
Revised Target |
Actual Constructed |
|
Individual Household Latrines |
66,42,000 |
58,99,637 |
62,60,606 |
|
Community and Public Toilets |
5,08,000 |
5,07,587 |
6,15,864 |
Sources: Swachh Bharat Mission Urban - Dashboard; PRS.
Figure 3: Expenditure on Swachh Bharat Mission-Urban during 2014-22 (in Rs crore)
Note: Values for 2020-21 are revised estimates and 2021-22 are budget estimates.
Sources: Union Budget 2014-15 to 2021-22; PRS.
The Standing Committee on Urban Development noted in early 2020 that toilets built under the scheme in areas including East Delhi are of very poor quality, and do not have adequate maintenance. Further, only 1,276 of the 4,320 cities declared to be open defecation free have toilets with water, maintenance, and hygiene. Additionally, it also highlighted in September 2020 that uneven release of funds for solid waste management across states/UTs needs to be corrected to ensure fair implementation of the programme.
The Standing Committee on Urban Development (2021) also expressed concern about the slow pace in achieving targets for source segregation and waste processing. The completion of their targets stood at 78% and 68% respectively of the goal set under SBM-Urban during 2020-21. In addition, other targets related to the door-to-door collection of waste also remained unfulfilled (see Table 2).
Table 2: Waste management under Swachh Bharat Mission-Urban (progress as of December 30, 2020)
|
Targets |
Target |
Progress |
Progress |
|
Door to Door Waste Collection (Wards) |
86,284 |
81,535 (96%) |
83,435 (97%) |
|
Source Segregation (Wards) |
86,284 |
64,730 (75%) |
67,367 (78%) |
|
Waste Processing (in %) |
100% |
65% |
68% |
Sources: Standing Committee on Urban Development (2021); PRS.
In February 2021, the Finance Minister announced in her budget speech that the Urban Swachh Bharat Mission 2.0 will be launched. Urban Swachh Bharat Mission 2.0 will focus on: (i) sludge management, (ii) waste-water treatment, (iii) source segregation of garbage, (iv) reduction in single-use plastics and (v) control of air pollution caused by construction, demolition, and bio-remediation of dumpsites. On October 1, 2021, the Prime Minister launched SBM-Urban 2.0 with the mission to make all our cities ‘Garbage Free’.
