Excise duty on petrol, diesel hiked by ₹3/litre; no change in retail prices

The government on Saturday (March 14) hiked the excise duty on petrol and diesel by a steep ₹3 per litre each to garner about ₹39,000 crore additional revenue as it repeated its 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 the tax changes as state-owned oil firms adjusted 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, special excise duty on petrol was hiked by ₹2 to ₹8 per litre in case of petrol and to ₹4 a litre from ₹2 in case of diesel.

Additionally, road cess was raised by ₹1 per litre each on petrol and diesel to ₹10. With this, the total incidence of excise duty on petrol has risen to ₹22.98 per litre and that on diesel to ₹18.83.

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

Officials said the increase in excise duty will result in the annual increase of government revenues by about ₹39,000 crore. The gains during the remaining three weeks of the current fiscal would be less than ₹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 cost ₹69.87 a litre in Delhi and a litre of diesel comes for ₹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 plummeting global oil prices.

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

It cut excise duty by ₹2 in October 2017 and by ₹1.50 a year later. But it raised excise duty by ₹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 a tight fiscal situation. This would help in generating the resources for the 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 ₹6 per litre (from ₹76.01 a litre on January 11, 2020 to ₹69.87 a litre on March 14 for petrol, and from ₹69.17 to ₹62.58 for diesel during the same period in Delhi).