Tax on Petroleum: Can Janardhan Right kind Yuvaraj Khatiwada’s Choice?


October 28, Kathmandu. On November 4, the Indian government decided to reduce taxes on petroleum products. As the retail price of petrol and diesel became historically high, the Indian government announced a reduction of Rs 5 on petrol and Rs 10 on diesel.

On the day of the government’s tax cut, petrol was priced at Rs 110.4 and diesel at Rs 98.72 in India.

The price of petrol fell by 6.7 paise per liter to Rs 103 per liter and diesel by Rs 11.75 per liter to Rs 86.67 per liter after the government announced a one-time tax rebate. The decision is estimated to cost the government 1.4 trillion rupees annually, according to the Indian Express Daily.

At the same time, the price of petroleum products, including high taxes, is rising in Nepal. Petrol price has come close to its highest point on July 12, 2070 after the recent increase in the price of petroleum by the Nepal Oil Corporation.

Petrol now costs Rs 136 per liter, up from Rs 140 then. In other words, the price of petroleum products coming from India has become Rs. 37 in Nepal and Rs. 30 more expensive in India than diesel. And because of this, the share of taxes levied by the government on petroleum products is very large.

How much tax on which petroleum product?

The government has secured its taxes on all types of petroleum products. The share of tax varies according to petroleum products. Diesel and petrol are taxed under five headings, while other items are taxed lower.

Petrol purchased from the Indian Oil Corporation at Rs 83.49 is currently taxed at Rs 57.73 per liter. Similarly, diesel priced at Rs 82.21 paisa has been taxed at Rs 40.41 paisa and kerosene at Rs 77.34 paisa has been taxed at Rs 18.

Taking the opportunity of declining prices of petroleum products in the fiscal year 2076/077, the then Finance Minister Dr. Yuvaraj Khatiwada had increased the customs duty on diesel and petrol by Rs 10 and infrastructure development tax by Rs 5 through the budget statement.

Domestic aviation fuel is taxed at Rs 16.10 per liter and internationally at Rs 7.08 per liter. The government has also levied a tax of Rs 278.86 per cylinder on liquefied petroleum gas (LPG).

According to the Ministry of Finance, about 11 percent of the total revenue collected by the government last fiscal year was collected from petroleum products.

In the Fiscal Year 2077/07, the government had collected Rs. 938.32 billion out of which Rs. 98.52 billion was collected from petroleum under six headings. And the amount is collected under the heading of income tax.

The government had collected Rs. 67.71 billion in revenue when the Nepal Oil Corporation made a profit of Rs. While the corporation went into a deficit of Rs. 3.57 billion in FY 2011/12, the government has collected Rs. 98.52 billion from revenue petroleum.

Question from an expert on tax efficiency

Experts participating in an event organized in the capital on the rising price of petroleum products and its impact on the economy questioned the transparency of revenue expenditure collected by the government from petroleum products. The economist Dr. Achyut Wagle has an opinion.

He argues that the problem would be solved by making better use of petroleum rather than reducing taxes. He said that the money raised by the government from petrol for infrastructure needs to be spent on infrastructure using electric stoves.

It would be unfair not to raise money and spend it in the interest of the people. Wagle said. “Reducing the petroleum tax would benefit 34 per cent, while increasing it could benefit 66 per cent of the people,” he said.

Former Commerce Secretary Kedar Bahadur Adhikari says that the tax levied on infrastructure should be reduced to stop the immediate rise in the price of petroleum. He said that the money raised under this title has not been used for a long time.

If the government decides to reduce the infrastructure tax by Rs 15, it will help reduce the impact of the rise in the price of petroleum products on the economy, ‘he said.

Jarnadan corrects Khatiwada’s decision?

Taking the opportunity of declining prices of petroleum products in the fiscal year 2076/077, the then Finance Minister Dr. Yuvaraj Khatiwada had increased the customs duty on diesel and petrol by Rs 10 and infrastructure development tax by Rs 5 through the budget statement. Before that, the customs duty on petrol was Rs 15.20 and infrastructure development tax was Rs 5, while the customs duty on diesel was Rs 7 and infrastructure development tax was Rs 5.

At the time, he claimed that customs and infrastructure development taxes would not affect prices. However, the tariff levied by the government at the customs point when petroleum is imported to Nepal is now linked to the consumer price.

Incumbent Finance Minister Janardhan Sharma called on former Finance Minister Dr. Can Khatiwada’s decision be corrected?

According to sources, the Ministry of Industry, Commerce and Supplies had decided to reduce the infrastructure tax on petroleum products by Rs 5 last July.

But Finance Minister Sharma is not in favor of immediate petroleum tax reconsideration, a finance official said. “It is not immediately possible to meet the current finance minister’s goal of higher revenue collection,” the official said.

Spokesperson and Joint Secretary of the Ministry of Finance Ritesh Shakya also said that the issue of reducing the tax on fuel is not under discussion. “The issue of rising and falling prices depends on the automated system of the government-owned company,” said Shakya.

Meanwhile, the ruling coalition’s student body has started agitation against the rise in prices of petroleum products.

Pancha Singh, chairperson of Akhil Krantikari, a student organization of the Maoist center, said that the tax rate should be reconsidered to give concessions to the people. Stating that the people should be given concessions even after deducting taxes, she said, “Infrastructure tax should be abolished to provide relief to the people.”

Stating that the corporation cannot trade at a loss, she said that the corporation should not sink and should not affect the people.

Chairman of the Janata Samajwadi Party (JSP) Rupnarayan Shrestha also said that tax concessions should be given to stop the rise in prices in the daily life of the people.

He said that even if the government gives subsidy to the Nepal Oil Corporation, the price of fuel should be limited to a maximum of Rs 110. He said that the finance minister should take special initiative to reduce taxes. The price of fuel should be reduced by reducing the tax by at least 12 to 15 rupees.





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