With the global crude prices continuing to fall, even hitting a five year low of $70 per barrel, the Government on Tuesday raised the excise duty on petrol by Rs2.25 per litre and by Re 1 a litre on diesel, though the retail pump rates will not be increased as oil firms decided to absorb the duty change for the time being.
This is the second excise duty hike in three weeks which will help raise an additional Rs 4,000 crore in four months till March 2015 as the Government seeks to take advantage of the global crude oil slump, to shore up its revenues without stoking inflation.Together with Rs1.50 a litre excise duty hike effected from November 12, the Government will mop up about Rs 10,000 crore in reminder of current fiscal that will help contain budget deficit.
With assembly election underway in Jammu and Kashmir and Jharkhand and polls due in Delhi soon, the state-owned fuel retailers have decided to absorb the excise duty change.The oil firms had cut petrol and diesel prices by 91 paisa a litre and 84 paisa per litre respectively to factor in slump in international oil prices.
Excise duty on normal or unbranded petrol has been hiked from Rs 2.70 per litre to Rs 4.95 a litre and on unbranded diesel fromRs 2.96 a litre to Rs3.96. The total incidence of excise on petrol after including special excise duty and road cess will be Rs 12.95 and that on diesel Rs 5.96 a litre.Similarly, excise duty on branded petrol has been raised from Rs 3.85 a litre to Rs 6.10 and on branded diesel from Rs 5.25 to Rs 6.25.
While the fall in global rates and the resultant cuts in retail prices have led to lower realisation on account of customs and VAT, particularly in case of state governments, there wasn't any loss to the central government on account of reduction in petrol and diesel prices as excise duty on the two fuels is fixed and not ad valorem.
Unbranded petrol at present attracts a basic excise duty of Rs 2.70 per litre, a special additional excise duty of Rs 6 a litre and a road cess ofRs 2 per litre.Unbranded diesel attracts a basis excise duty of Rs 2.96 a litre and road cess of Rs 2 per litre.The total excise duty on unbranded petrol will rise from Rs 10.70 to Rs 12.95 per litre and that on unbranded diesel from Rs 4.96 per litre to Rs 5.96.