The daily increase in fuel rates started on June 7 as oil companies resumed daily revision in prices in line with costs after ending an 82-day gap. It has taken diesel prices to fresh highs and petrol price too is at a two-year high.
The 82-day freeze in rates this year was imposed in mid-March soon after the government raised excise duty on petrol and diesel to shore up additional finances.
The government had on March 14 increased excise duty on petrol and diesel by Rs 3 per litre each and then again on May 5 by a record Rs 10 per litre in case of petrol and Rs 13 on diesel. They gave the government Rs 2 lakh crore in additional tax revenues.
Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) instead of passing on the excise duty hikes to customers, adjusted them against the fall in the retail rates that was warranted because of a decline in international oil prices to two-decade lows.
International oil prices have since rebounded and oil firms are now adjusting retail rates in line with them.
Rates have been increased across the country and vary from state to state depending on the incidence of local sales tax or value-added tax (VAT).
Taxes make up for nearly two-thirds of the retail selling price. As much as Rs 50.69 per litre or 64% in petrol price is due to taxes—Rs 32.98 is the central excise duty and Rs 17.71 is local sales tax or VAT.