Nagaland imposes Covid-19 cess on fuel leading to ₹6 per hike in petrol ₹5 diesel prices

• Nagaland’s Covid-19 cess increases petrol prices by ₹6 per and diesel by ₹5 per litre.
• In addition to Nagaland, Assam and Meghalaya have also increased petrol and diesel prices.
• Experts suggest that while hiking fuel prices helps the government, it will hurt the economy as a whole.

Nagaland has announced a Covid-19 cess on petrol and diesel to meet the financial burden caused due to the epidemic. This cess has already come into effect in the state and petrol prices rose by ₹6 and diesel by ₹5 per litre.

“In exercise of power conferred by subsection 3 of section 3A of the Nagaland (sales of petroleum and petroleum products including motor spirit and lubricants) Taxation Act, 1967 (as amended) the Governor of Nagaland is pleased to notify that in addition to existing rate of tax and cess, the COVID-19 cess shall be levied,” the Additional Chief Secretary and Finance commissioner Sentiyanger Imchen in a notification said on Tuesday, April 28.

Crude oil prices have crashed due to the drastic fall in fuel consumption. The WTI crude oil futures for May dropped below zero for the first time in history, sending shockwaves across the world.

Assam and Meghalaya have also increased fuel prices

Nagaland’s northeast siblings Assam and Meghalaya have also increased fuel prices to meet the revenue shortfall caused by the lockdown.

Assam increased petrol and diesel prices by ₹5 per litre, while Meghalaya announced a 2% sales tax surcharge (effectively ₹2 per ₹100 worth of petrol and diesel).


Experts suggest fuel price hike will hurt the economy

While imposing fuel price hikes will help the Nagaland government shore up some revenue, experts suggest that it will hurt the overall economy.

“From an economic standpoint, state governments would stand to gain from Covid cess, as the same is nothing but a mechanism to pocket the benefits accruing on account of decline in global oil prices,” Harpreet Singh, partner, indirect tax at KPMG India told Economic Times.

In the last few weeks, crude oil prices have been slipping globally pushing Brent crude to XXX per barrel as of today. As it will decrease the cost of inventory and eventually prices, a cess-increase would fall lightly on the consumers.

Could this lead to other states hiking fuel prices as well?

This move by the Nagaland government has already caused two other states to announce fuel price hikes. This could cause a spill over in other states as well, leading to a fuel price hike in several other states in the country.

From the states’ standpoint, the 40-day countrywide lockdown has caused the Indian economy to come to a standstill. This has led to a fall in revenue collections, with states like Punjab requesting the central government to lift the ban on liquor sales during lockdown.

The nationwide Coronavirus lockdown is scheduled to end on May 3, although a few states are expected to extend it further to control the spread of Coronavirus.

See also:

Coronavirus lockdown may extend beyond May 3 in urban areas of Maharashtra

IIT-Mandi lists out eight states where the lockdown should not be lifted — including Gujarat and Madhya Pradesh

Punjab CM extends curfew till May 17 but relaxes it for 4 hours between 7-11 am