Delhi Govt Increases VAT On Petrol & Diesel; Prices Hiked By ₹1.67 & ₹7.10

The added costs won't be passed on to the consumers, the government has clarified.

The announcement came after Oil Minister Dharmendra Pradhan on Monday said the demand for fuel is "set to recover" as the Centre has announced major relaxations on industrial activity and movement of people, according to NDTV.

The government had on March 14 hiked the excise duty, and road and infrastructure cess by Rs 3 a litre each for both petrol and diesel. This gave it the flexibility to raise duties on petrol and diesel by another Rs 8 per litre each. The revised tax rate stands at 30 percent for petrol from the earlier 27 percent, while diesel now attracts nearly twice the duty - 30 percent compared to 16.75 percent before.

Government sources said the revenue generated from these duties would be used for infrastructure and other developmental expenditure. Petrol prices climbed to Rs 71.26 per litre from Rs 69.59 per litre on May 4 (an increase of Rs 1.67 per litre) and diesel prices jumped to Rs 69.39 per litre from Rs 62.29 per litre the previous day (a significant markup of Rs 7.10 per litre).

The price of a barrel of Brent crude fell from 64 U.S. dollars at the start of the year to less than 19 dollars in April, due largely to plummeting demand from a global economy hit by the coronavirus pandemic. The Delhi government has already chose to levy a 70 percent hike on liquor as a "special corona cess". Prices have since rebounded to around Dollars 28 a barrel.

The move to hike fuel prices is expected to boost the government revenue, which has been hit hard due to the coronavirus lockdown, news agency IANS reported quoting Delhi government officials.

The government on Tuesday evening hiked excise duty by a record ₹10 per litre on petrol and ₹13 per litre on diesel to garner ₹1.6 lakh crore additional revenue as it repeated its time-tested formula of not passing on gains arising from a slump in global oil prices. Haryana hiked Value-Added Tax on petrol by Re 1 a litre and Value-Added Tax on diesel by Rs 1.1 a litre last week.