New Delhi: The government recently cut petrol and diesel rates by Rs 2.50 a litre. The same day, 12 states slashed fuel prices after the government announced a Rs 1.5 per litre cut in excise duty and made state-run oil companies absorb a Re 1 per litre cut. However, Delhi did not follow suit.

Delhi Chief Minister Arvind Kejriwal called the excise duty cut on fuel “cheating” and demanded that the Modi government reduce duty by Rs 10 per litre.

On 18 January, 2016, the Kejriwal government raised the VAT on petrol and diesel by 2% and 1.4% respectively, saying that the should bring in prices of these products in all northern states.

It is speculated that if the VAT is cut down in densely-populated cities like Delhi where vehicular traffic is huge, the government will suffer a major loss and the economy will suffer; whereas in places like Goa, a reduction in VAT will not affect the government as much because they are not dependent on the tax on fuel as much as some of their contemporaries.

Even as the fuel prices are hitting new highs every day, the government is holding off on reducing the excise duty rates. The government claims that they simply cannot afford it, and is bearing the brunt of the anger of the common man ahead of the 2019 Lok Sabha elections.

According to the Petroleum Planning and Analysis Cell (PPAC), the Centre earned Rs 2,42,691 crore from excise duties on fuel in 2016-17.  According to a report in The Hindu, at the time, the excise duty rate on petrol was ₹21.48 and on diesel Rs 17.33 per litre. The government has unofficially estimated the revenue loss of a Re 1 cut in excise duties on fuel at Rs13,000 crore, while back-of-the-envelope calculations by the daily peg this at anywhere between Rs11,000 crore and Rs 14,000 crore.

GST collections have fallen short by Rs 18,000 crore a month on average.

The government cannot afford to further reduce the indirect tax collections.

Union minister Vijay Goel rode a cycle in Delhi's Paharganj area on Tuesday to protest against the Kejriwal-led government for not reducing the value-added tax on petrol and diesel prices. Goel claimed that the Delhi government was not paying heed to people suffering due to rising fuel prices.

The Kejriwal government realises Rs 29 as VAT on petrol and diesel, he claimed.

Earlier, Delhi Congress chief Ajay Maken wrote to Kejriwal requesting him to reduce the VAT on petrol and diesel “to the same level as it was in December, 2013, during the Congress regime in the city”