Steep Hike in Petrol and Diesel Prices in Chennai; Reasons and New Price Structure Listed Here!

The prices of petrol and diesel were increased recently causing an addition of ₹3.25 and ₹2.50 per litre. The state government issued a notification saying that it has changed the tax structure for petroleum products that would come into effect from Sunday. 

According to media reports, the centre is expected to reduce the retail selling price of petrol. Since that move is anticipated to reduce the state’s revenue, it took the decision to increase petrol and diesel prices.

“The Amma Makkal Munnetra Kazhagam founder T.T.V. Dhinakaran, in a series of tweets, condemned the decision, which, he said, would hit the poor and the middle class at a time when the prices of essential commodities were on the rise. He has urged the government to roll back the hike”, The Hindu cited in its report. 

The move received criticism from people since it is coming at a time when the global pandemic has left a crippling effect on the citizens. Most of the Indians are facing an income squeeze and this is being seen as an unfair move. It is also anticipated to bring down the consumer demand.

However, experts note that the TN govt. has its own reasons for doing so. India’s crude oil tanks are all full as a result of which it couldn’t purchase oil from other countries when the global crude oil prices dropped amid coronavirus pandemic. Hence, neither India nor the state benefitted from the fall in global crude oil prices. 

The state is said to have taken the move due to the revenue deficit it is facing. The state’s tax revenue structure proves the point in case.  According to Times of India’s report, the government raises 1.59 lakh crore (budget estimate for 19-20). Of every Rs. 100 raised through taxes, about 63 comes from taxes directly under the state tax administration (own tax revenue of the state).” A huge part of this tax comes from goods and services tax levied on consumption, sales taxes on alcohol, petrol and diesel. The state might fail to collect tax from these sources to meet the initial estimates. 

The collection from all these sources have collapsed but the government is also expected to spend on devising mitigation strategies against the spread of COVID-19. Hence, experts see this as a fair move that would enable the state to save its tax revenue structure from collapsing.