Centre Raises Excise Duty On Petrol, Diesel By Historic Levels

The government on Tuesday evening hiked excise duty by a record Rs 10 per litre on petrol and Rs 13 per litre on diesel to garner Rs 1.6 lakh crore additional revenue as it repeated its time-tested formula 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 will adjust them against the recent fall in oil prices, industry officials said.

According to a notification issued by the Central Board of Indirect Taxes and Customs, special additional excise duty on petrol has been hiked by Rs 2 per litre and road cess has been hiked by Rs 8 a litre.

In case of diesel, special additional excise duty has been hiked by Rs 5 per litre and road cess has been raised by Rs 8 a litre.

With this, the total incidence of excise duty on petrol has risen to Rs 32.98 per litre and that on diesel to Rs 31.83.

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.

This is the second time since March that the government has hiked excise duty to mop up gains arising from fall in international oil prices. It had raised excise duty on petrol and diesel by Rs 3 per litre each in March to garner about Rs 39,000 crore.

Petrol and diesel prices have not been revised since March 16 despite international oil prices falling to a two-decade low. The gains will now be adjusted against the excise duty hike.

Petrol costs Rs 71.26 a litre in Delhi and a litre of diesel comes for Rs 69.39.

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.

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 that helped 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 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 to meet the expense of coronavirus fight.