Centre working on long-term solution on fuel price hike: Pradhan

Centre working on long-term solution on fuel price hike: Pradhan

The tax may come in form of a cess, will kick in the moment oil prices cross $70/bbl. And oil producers are now getting paid global rates in dollar terms even when they produce oil from Indian fields.

Analysts believe that the less production of oil in the OPEC (Organization of the Petroleum Exporting Countries) and hike in crude oil price in the worldwide market are some of the factors affecting the fuel price.

As of now, the excise duties levied by the Centre in last three years has gone up 105% (petrol) and 300% (diesel). Additionally, states too would be asked to cut sales tax or VAT to show a visible impact on retail prices.

Bhamy V. Shenoy, who has been on the board of oil companies in Georgia besides being a consultant, contested the claims of former Union Finance Minister P. Chidambaram that petroleum prices can be reduced by ₹25 a litre. Annual imports right now are about 1.575 billion barrels and for every dollar change in oil prices upwards, its import bill swells by US$13 million. Petroleum minister will have a meeting with the officials of the oil companies. Now it is the turn of the state government to cut the Value-Added Tax it is collecting on fuel.

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"The reasons that the union oil minister is giving is not justified".

Petrol and diesel prices rose for the 11th consecutive day on Thursday, with prices in Delhi touching Rs 77.47 for a litre of petrol and Rs 68.53 for a litre of diesel.

Indications are that the windfall tax may continue for a substantial period of time or could be part of the government's long-term policy to deal with such situations in the future. It is learnt that Indians living on the borders of the above two countries draw their requirement of petrol and diesel from across the borders at nearly half the rates. In October a year ago, the Centre cut excise duty by Rs 2.

It has also worked out the math of the amount of taxes that are shared with states as part of the devolution formula and what goes to the exchequer.

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