• Petrol and diesel prices are up by Rs 1.67 per litre and Rs 7.10 per litre, respectively, compared to May 4.
• Kejriwal government has hiked VAT by 3 percent on petrol and by 13.25 percent on diesel.
• Price hike should help boost government’s depleted revenue stream during lockdown.

Petrol and diesel prices in Delhi witnessed a considerable mark-up today, May 5, 2020, on the back of the Delhi government’s decision to hike tax rates levied on fuel. 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).

According to a PTI report, the Arvind Kejriwal government recently hiked the local sales tax or the value added tax (VAT) component of motor fuels. The revised tax rate stands at 30 percent for petrol from the earlier 27 percent, while diesel now attracts almost twice the duty – 30 percent compared to 16.75 percent before. As a result, VAT makes up for a substantial Rs 16.44 per litre of petrol prices and Rs 16.26 per litre of diesel prices in the national capital as of May 5, according to the Indian Oil Corporation’s data.

Delhi government’s latest move comes due to conditional relaxations in the third phase of the lockdown which expects see an uptick in the number of road users and fuel consumption. With taxation of fuels forming a significant portion of a state’s revenue streams, the nationwide lockdown dealt a considerable blow to state incomes across India. Earlier, Kejriwal was reported to have expressed concerns over his government’s revenue in April 2020, which was only a fraction compared to the figure from a year ago. Though an increased burden on commuters, the hike in taxes is aimed at providing a fillip to the Delhi government’s revenue streams.

Comparing the national capital’s fuel prices to other major cities, Mumbai's fuel prices are currently pegged at Rs 76.31 per litre for petrol and Rs 66.21 per litre for diesel. Similarly, prices for a unit of petrol and diesel stand at Rs 73.55 and Rs 65.96, respectively, in Bengaluru; and at Rs 75.54 and Rs 68.22 respectively, in Chennai. While petrol prices in Delhi undercut those in the above cities, it is apparent that the capital’s commuters will be paying a significant premium for diesel.