Petrol and diesel price hike has been making the headlines virtually every day since more than two weeks now.

Almost every one in the country now wants that the government should come forward and take some positive steps to control the continuous hike in prices.

At last, it appears that the government may soon cut Rs 4-5 in auto fuel prices in most parts of the country.

But this is dependent on a central government plan. The plan involves a marginal cut in the excise duty on the auto fuel, and provided that it is successful in its efforts to convince the states to cut the Value Added Tax (VAT) on auto fuel and oil marketing companies to accept a reduction in their commission on sales.

A senior-most bureaucrat in the Narendra Modi government reportedly detailed the plan to the media. According to this source, the government is very worried about the fuel price hike. The cut could happen “very soon”, the source told the media. It is also important that states and oil marketers do the needful, the person added, because the “Centre alone cannot bear the burden”.

On Wednesday, Kerala announced a Re 1 cut in petrol and diesel prices, with effect from June 1, by a reduction on sales tax on auto fuel.

There has been a constant increase in fuel prices over the last fortnight.

On Wednesday, petrol was selling at Rs 78.42 per litre and diesel at Rs 69.30 a litre. The increase was accorded to a rise in global crude oil prices.

In 2016-17, the average price of crude in India’s basket was $47.56 a barrel. That rose to $56.43 in 2017-18. It was $63.80 in March and by April this year, it was $69.30 a barrel.

Oil is currently trading at close to $75 a barrel, down from a high of almost $80 last week, a fall that has given a little relief.

The fuel hike has hit the country very badly and has raised a high potential of inflation. The hike gave an opportunity to the rivals of the National Democratic Alliance’s (NDA) to criticise the government.

This is because taxes form a significant component of the fuel price. Despite variations across states, the trend in more or less similar. For example, in Delhi, 25% of fuel price goes to central taxes, 21.2% to state taxes and 4.7% in dealer margins. The central tax was increased by the NDA government when the international price of the fuel was low and used the additional amount to finance development programs.

According to another government official quoted in the media, the taxes on fuel finance about Rs 120,000 crore worth of public expenses.

One of these officials who asked not to be identified said “at the time when private companies were not willing to invest money into the country, the Modi government using prudent public finance policy decided to push up the public spending.”

42% of the central tax is given to the states.

Last week petroleum minister Dharmendra Pradhan hinted at the government considering a longer-term solution for fuel price controlling. While details of the plans have not been made public, reports suggest that one of the plans consists of formation of a consortium of oil consuming countries – such as China. to strike favourable deals with major oil producers such as Saudi Arabia.

(Adapted from