Why central government’s hands are tied in the context of reducing cess / tax on petroleum products?
Central government has decided to increase spending on the following sectors / heads :

1. As per new education policy, government will increase allocation to education from 1% to 6%.( step by step ) of GDP

2. Strengthen medical infrastructure as well as combat COVID. This will lay the long-term foundation for better medical facilities for all

3. Massive investment in Infrastructure i.e. Port, waterways, highways, airways, railways and Industrial corridors. This is to stimulate growth, create jobs and develop assets for the future generations.

However, the government has very few options to raise resources for such critical investments for the future. The reasons are as follows:

1. Government can't raise direct or indirect taxes during this Pandemic situation
2. Globally, India need to remain an attractive investment destination in order to access the critical global capital. Thus India’s current rate of corporate tax, which is aligned to the globally

competitive rates, cannot be raised.
3. Only around 1.5 crore Indians pay income tax. That is just a little over 1% of India's population and only 1.6% of the country's adult (over 20 years) population Yes, India needs more hones tax payers.

So the central government has planned to raise revenues through:

1. Selling PSUs ( Congress / CPM / TMC also followed/follows the same when they are in power and oppose otherwise ).

Government’s role should be limited to oversight / framing laws and the business operations should be left to the private players in most of the cases.

2. India heavily depends on imported crude oil and need to spend dollars for that. Thus, India also need to keep a hawk’s eye on the Balance-of-Payment situation in order to keep its currency competitive.

Hence government is discouraging use of petroleum. We are paying little more for our better education, health & Industrial development only.

Government is able to control price rise of critical commodities produced in our county and thus, inflation is still under control.
In a nut shell, we need to pay for our future and government has opted for taxing the petroleum products towards that end..