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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)

image

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)

image

image

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) 

image

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 January 17, 2020, the Ministry of Health and Family Welfare acknowledged the emergence of COVID-19 that was spreading across China. On January 30, 2020, the country’s first COVID-19 positive case was reported in Kerala.  By March 11, 2020, the World Health Organisation declared COVID-19 as a global pandemic.  This blog summarises the key policy measures taken by government of Kerala to respond to the pandemic.  

As on April 22, Kerala has had 427 confirmed cases of COVID-19, of which 307 have recovered (highest rate of recovery in the country). Only three deaths have been recorded in the state so far.

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Pre-lockdown period: Early measures for containment

Following the first confirmed case involving a returnee from Wuhan, China, the initial responses by the state were aimed at surveilling, identifying, and conducting risk-based categorisation of all passenger arrivals from China and others who had come in close contact with these travellers. As two more cases were confirmed on February 2 and 3, the state government declared a health emergency in the state. 

Subsequently, a health advisory was issued to track, identify, and test all travellers with a travel history to Wuhan since January 15, 2020.  Such passengers and their close contacts were to be kept in isolation for 28 days.  The advisory also directed all lodging establishments to maintain a register of travellers with travel histories to corona-affected countries. A similar advisory was issued for student returnees as well. With no further confirmed cases being reported immediately, on February 12, the state withdrew the health emergency.  However, a high state of response and surveillance continued to be applied.

Second wave of infections

When a second wave of infections began spreading in early March, the government took several multi-pronged measures to address the threat. The following measures were taken in this regard:

  • Health measures: Revised guidelines for the clinical management of COVID19 patients, covering testing, quarantine, hospital admission, and discharge, were issued.  
     
  • Instructions were issued regarding airport safety protocols as well as testing of foreign nationals entering and exiting the state. All foreign arrivals, even if asymptomatic, were to be kept in isolation until their test reports were available. 
     
  • Further guidelines and precautions on social distancing and various hygiene norms, such as, use of sanitsers, were also issued to malls, shopping centres, and salons
     
  • Movement restrictions: All non-medical educational institutions, including anganwadis and madrassas were immediately shut down till March 31 and exams of classes 1-7 were postponed. Exams for classes 8 and above were to be held as scheduled. University exams were also postponed till March 31.
     
  • Government departments were asked to make temporary arrangements regarding working hours of their employees. Officials were also instructed to look into welfare measures for migrant workers.
     
  • Guidelines were also issued to private establishments regarding working time, safety measures, and leave for employees.
     
  • Administrative Measures: On March 17, COVID19 was declared a notified disaster, thus becoming eligible for funds from the State Disaster Response Fund (SDRF). SDRF is the primary fund available with state governments for responses to notified disasters. Notifying a disaster enables states to spend more from the SDRF to fight the said disaster.
     
  • In order to better coordinate the state’s response, the government issued instructions to constitute COVID-19 cells in all departments. Meetings and inspections by government officials were also to be avoided. 
     
  • Local Self Government institutions were assigned various roles and responsibilities. These include: (i) running awareness programs, such as, ‘Break the Chain’ initiative, (ii) conducting sanitation and cleanliness drives, (iii) regular outreach to home isolated/quarantined persons, (iv) activating committee system to manage responsibilities, (v) ensuring availability of essential commodities, (vi) categorising and ensuring available response mechanisms, such as, material resources, volunteers, medical resources etc, and (vii) ensuring special attention to vulnerable populations, such as senior citizens, and persons with co-morbidities or undergoing special treatments. 

The lockdown period

On March 23, Kerala announced a state-wide lockdown till March 31.  A day later, the central government announced a nation-wide 21-day lockdown.  

Restrictions imposed under the state’s order included: (i) stoppage of all forms of passenger transport services, (ii) prohibition of a gathering of more than five persons, and (iii) closure of all commercial establishments, officers, and factories, except those exempted.  Use of taxis, autos or private vehicles was permitted only for procurement of essential commodities or for medical emergencies. Establishments providing essential goods and services such as banks, media, telecom services, petrol bunks, and hospitals were permitted to operate.  

On April 15, the central government extended the lockdown till May 3.  Some of the key measures undertaken during the lockdown period are: 

Administrative Measures

  • A round-the-clock war room, comprising members of different departments, was set up to monitor and supervise all COVID-19 containment activities. 
     
  • Corona media cell was set up to monitor and tackle the threat of fake news surrounding COVID19.  
     
  • With the legislature not in session, the Kerala Epidemic Diseases Ordinance, 2020 was promulgated by the Governor of Kerala on March 26. The Ordinance empowers the state government to undertake necessary measures and specify regulations to counter the threat of an epidemic disease.  It also specifies a penalty for those who violate orders made under this Ordinance. 

Healthcare Measures

Essential Goods and Services

  • On March 25, the state declared a list of essential services under the Kerala Essential Services Maintenance Act, 1994. 
     
  • Various exemptions from lockdown were issued to services that were later deemed essential. These include: (i) shops and bakeries, including departmental stores, (ii) online food deliveries, (iii) parcel services, for delivery of essential goods, (iv) automobile service workshops, (v) shops and service centres for mobile phones, computers etc, only on Sundays, and (vi) plumbers and electricians to undertake maintenance work in houses and flats. 
     
  • On April 3, orders were issued to set up community kitchens under the aegis of Kudumbasree and Local Self Governments (LSGs). Kudumbasree is the poverty eradication and women empowerment programme implemented by the Kerala government. As on April 20, a total of 339 Community Kitchens have been functioning in 249 panchayats across 14 districts of the state. They have served a total of 5,91,687 meals since April 4, 2020. The government has also instructed LSGs to hire volunteers for the kitchen and pay them an honorarium of Rs. 400 (for one-time service) or Rs. 650 (for the whole-day).

Welfare Measures

  • Under SDRF norms, funds were released to the Health Department for relief and response activities for COVID-19. 
     
  • Each District Collector has been allocated Rs. 50 lakh for carrying out various COVID-19 outbreak-related control and prevention activities.
     
  • Financial assistance has been sanctioned to (i) fishermen, (ii) artists, (iii) lottery agents and sellers, and (iii) elephants and other such animals being looked after. 
     
  • A 2000-crore worth Chief Minister’s Helping Hand Loan Scheme was announced for people facing lockdown-related unemployment and hardships. The scheme will be operationalised through neighbourhood groups under the aegis of Kudumbasree. 

Post-lockdown strategies – Strategies easing lockdown relaxations

  • Expert Committee: On April 4, an Expert Committee was constituted by the government and on April 6, the Committee submitted its Report on the guidelines for post-lockdown regulations. It recommended a conditional, three-phase strategy, with districts being the unit of implementation. Relaxations would be progressively eased in each phase depending on criteria, such as, (i) number of new confirmed cases, (ii) percentage increase/decrease in number of persons under home surveillance, and (iii) no emergence of hotspots.. 
     
  • Containment Guidelines: After the lockdown was extended till May 3, the state released revised guidelines for containment, that recommended classification of districts into four zones, based on number of cases and disease threat. The zones – Red, Orange A, Orange B, and Green – would have different, graded restrictions, with Red having stringent restrictions in the form of a lockdown till May 3. The Orange A and B zones would have a lockdown till April 24 and 20 respectively, followed by a partial relaxation thereafter. Green zone would have a lockdown till April 20 and relaxation in restrictions thereafter.
     
  • Based on the above order, the state issued an advisory for industrial units to follow while resuming operations. Some of the Standard Operating Procedures to be followed include: (i) conducting disinfectation of premises, machinery, and vehicles, (ii) arranging exclusive transportation facilities with vehicles operating at 30-40% capacity, (iii) mandatory thermal scanning of people, (iv) following hygiene and social distancing norms, including a cap on elevator capacities and size of meetings (v) mandatory corona-related insurance cover for workers, (vi) mandatory use of CCTVs, and (vii) preparing a list of nearby COVID-19 hospitals .

For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.