'Petrol, Diesel Prices Will tumble to Rs 75/litre, Rs 68/lit If brought Under GST'

Bhubaneswar:  With the prices of petro-fuels burning the pockets of the common man, a big revelation has been if states agree with the Centre to bring the petro-products under the ambit of GST, only within 24-hours, the rate of the fossil fuels per litre will crash to just Rs 75 per litre.

This is not a mere conjecture. An SBI research study led by SBI Chief Economic Advisor Soumya Kanti Ghosh has made a stunning revelation. The study says,

"After using all the assumptions like the cost of crude oil per barrel at around $60, the dollar-rupee exchange rate having been pegged at Rs 73 and many other essentials structures, we found that the price of petrol will come down to Rs 75/litre and diesel to Rs 68/litre."

Elaborating it further, he said,

" We estimate the petrol and diesel prices if the Government includes petrol and diesel in GST regime also. Our base estimate is based on the following assumptions: a) Crude price at $60/bbl; b)Rupee dollar exchange rate at Rs 73; c) transportation charges of Rs7.25 for diesel and Rs 3.82 for petrol d) Dealer Commission of Rs 2.53 for diesel and Rs 3.67 for petrol; e) Cess of Rs 30 for petrol and Rs 20for diesel (with the equal division between centre and states) and f) GST rate at 28 per cent (Centre:14 and State:14)."

The SBI study report further added that if the price for the petro fuels is fixed at Rs 75 and Rs 68 for petrol and diesel, respectively, then the loss to the Centre will be mere around Rs 1lakh crore and for the states that will be around Rs 30,000crore.

ODISHA PERSPECTIVE: WILL THE STATE AGREE?

As per the SBI report, Odisha depends more on petro revenue. The research data shows that the State finished 8th in the country, where the petro-oil revenue contributes nearly 17-18 per cent of Odisha's own tax revenue. For this reason, the State shows the lukewarm response to the demand of bringing the petro-fuels in the ambit of GST.

At present Odisha receives 41 per cent of petro revenue collected by the Centre, and the State go for additional levies like the VAT on petro fuels to fund its development schemes.

In the month of January, the price of the Indian basket of crude oil stood at Rs 3801 per billion barrel litre (bbl), and on February 23 the price has risen to Rs 4486 per bbl. On February 26, the price is quoted at Rs 4,763.28.

As a consequence, the State is now collecting over Rs 22/litre on Petrol and Rs19.32 per litre on diesel. On the contrary, on Feb 1, the State was collecting around Rs 20 per litre from petrol and Rs 18/lit on diesel.

Due to this buoyancy, the State Budget presented on Feb 22 had projected a 25 per cent rise in the tax revenues mobilised from sales tax/VAT to an amount of Rs 9000 crore. And it had estimated that the VAT on petro will contribute around Rs 1600 crore.