How your fuel bill may be brought down without cutting taxes

NEW DELHI: Petrol and diesel prices set new records again on Monday as they hit Rs 80.73 and Rs 72.83 a litre respectively in Delhi. Fuel prices in Delhi are the cheapest among all metros and most state capitals due to lower taxes.

The centre's excise collection from petro products has more than doubled in four years (from Rs 99,184 crore in 2014-15 to Rs 2,29,019 crore in 2017-18). States have seen their value added tax (VAT) revenue from petro goods rise from Rs 1.37 lakh crore in 2014-15 to Rs 1.84 lakh crore in 2017-18.

Read here: How govt can cut taxes on fuel without affecting revenues

However, there are a few policies which the government might undertake in order to lower fuel prices without cutting down on taxes.

GST

Taxes make up over 50 per cent of the cost of petrol and diesel. Currently, the highest slab of goods and services tax (GST) is 28 per cent. Even if the government carves out a separate slab for fuel --say, 40 per cent, the cost will come down significantly.

CHEAPER CRUDE TO RETAILERS

ONGC, which supplies 20 per cent of our crude requirements and has made 'windfall gain' from rising oil prices, may be asked to sell crude at lower price to retailers. In return, the government will ask for lower dividend from the company.

FUTURES TRADING

By definition, Futures are financial contracts which obligate the buyer to purchase an asset or the seller to sell an asset at a predetermined future date and price. Thus, futures trading involves buying specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future.

The launch of futures contracts on diesel and petrol will allow consumers to buy these contracts at a fixed price to take delivery at a future date. This means if they buy some amount of petrol and diesel at a particular price on a particular date for taking delivery say after a month, and even if the price is higher on the date of delivery, they will still get the products at the same price on the date of purchase.
While the oil ministry has okayed this policy, market regulator Sebi is yet to approve.
CRUDE DISCOUNT
OPEC, the oil cartel, sells oil at a higher rate to Asian nations including India than it does to western buyers, which is called 'Asian premium'. The government is trying to get other countries on its side to put pressure on the OPEC countries for a discount.

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