WTF: Government raises excise duty on petrol, diesel by Rs 3 per litre

New Delhi: The Union government today hiked excise duty on petrol and diesel by a steep Rs 3 per litre each to garner about Rs 39,000 crore additional revenue. This is a repeat of this government's 2014-15 act of not passing on gains arising from a slump in international oil prices.

Retail prices of petrol and diesel will not be impacted by these tax changes as state-owned oil firms will adjust them against the recent fall in oil prices and the likely trend in the near future, industry officials said.

According to a notification issued by the Central Board of Indirect Taxes and Customs, the special excise duty on petrol was hiked by Rs 2 to Rs 8 per litre in the case of petrol and to Rs 4 a litre from Rs 2 in the case of diesel.

Additionally, road cess was raised by Re 1 per litre each on petrol and diesel to Rs 10.

With this, the total incidence of excise duty on petrol has risen to Rs 22.98 per litre and that on diesel to Rs 18.83.

The tax on petrol was Rs 9.48 per litre when the Modi government took office in 2014 and that on diesel was Rs 3.56 a litre.

Officials said the increase in excise duty will result in an annual increase of government revenues by about Rs 39,000 crore. The gains during the remaining three weeks of the current fiscal would be less than Rs 2,000 crore.

Petrol and diesel prices, which are changed on a daily basis, were cut by 13 paise and 16 paise respectively as oil companies adjusted the excise duty hike against the drop in prices that warrants from international rates slumping the most since the Gulf war.

Petrol now costs Rs 69.87 a litre in Delhi; a litre of diesel comes for Rs 62.58.

The government had between November 2014 and January 2016 raised excise duty on petrol and diesel on nine occasions to take away gains arising from falling global oil prices.

In all, duty on petrol rate was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months, which helped the government's excise mop up more than double to Rs 2,42,000 crore in 2016-17 from Rs 99,000 crore in 2014-15.

It cut excise duty by Rs 2 in October 2017 and by Rs 1.50 a year later. But it raised excise duty by Rs 2 per litre in July 2019.

Government sources said that while the benefit of reduction of crude prices in the first quarter of this year has significantly gone to the consumer, the Centre has taken this step of increasing duty to raise some revenue in view of the tight fiscal situation. This would help in generating the resources for development of infrastructure and other developmental items of expenditure, they said.

Benchmark crude oil prices have halved since January to USD 32 per barrel. In sync with this, the prices of petrol and diesel have also come down by more than Rs 6 per litre (from Rs 76.01 a litre on January 11, 2020 to Rs 69.87 a litre on March 14 for petrol, and from Rs 69.17 to Rs 62.58 for diesel during the same period in Delhi).