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As petrol prices rise, govt rakes in R 1 lakh cr from taxes
November, 24th 2011

At a time when the government is arguing that "under-recoveries" for oil companies are forcing an upward revision in oil prices, its own coffers have seen windfall gains from taxes on high prices. Indirect taxes on petroleum fetched the exchequer Rs 1 lakh crore in 2010-11, a jump of 43% or over Rs 30,000 crore from the previous year.

That's not all. The government's earnings from dividends and royalty payouts as well as profit on petroleum from private oil contractors was a sizeable Rs 20,000 crore in the fiscal ending March 31, 2011.

After the last hike on November 3, 2011, the oil ministry had said that "it is entirely misleading to calculate profit of oil companies based on the quotes of international crude and product prices of a few days." It also pointed out that the companies were expected to lose Rs 1.32 lakh crore during the current financial year, or 26% of India's oil import bill.


Similar arguments have been put foward each year and before and after every hike. But the dividend payout increase of 13% in 2010-11 in the state-controlled oil companies over the previous year reveals a much better performance than most other corporate houses, particularly in a year when the industry has been going through a global financial turmoil and a slowdown.

After the recent hike in fuel prices, the government had blamed the increase on the global situation, a "problem beyond control of the government." The rise in international crude prices and a devalued Indian rupee had led to a hefty oil import bill, it had said.

But against the claim that the oil companies and the government are sharing the burden of an abnormal hike in international crude prices, the income generated through indirect tax collections paints a different picture.

The government's earnings through royalty, dividends and profit sharing have been steadily rising over the years. They have risen by 32% in 2010-11 in comparison with the 2008-09 figures.

The government had earlier in June cut duties to give some relief to the common man by reducing import duty on petrol and diesel from 7.5% to 2.5% while doing away with customs duty of 5% on crude oil. The excise duty on diesel was reduced by Rs 2.60 to Rs 2 per litre.

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