With global crude prices steadily falling and Brent crude even hitting a four-year low of $79.86 per barrel, the Government on Thursday hiked the excise duty on petrol and diesel by Rs1.50 a litre. However the good news for the common man is that the retail prices will not go up as oil companies have offset the hike against an expected reduction on account of falling global oil rates.
The duty hike, which was notified late on Wednesday evening, will boost Government revenue by about Rs13,000 crore on an annual basis and help contain budget deficit.
Indian Oil Corp (IOC), the nation’s largest fuel retailer, said the excise duty hike will not be passed on to consumers and will be adjusted against reduction in rates that was likely by this weekend.
The fall in international oil prices had resulted in six consecutive reduction in petrol prices since August and two in diesel in the last one month. There was a possibility of another round of cut this weekend.
Meanwhile the falling global crude prices left an impact on IOC’s financials as the company reported a net loss of Rs 898 crore in the second quarter of the current fiscal, as the drop in international oil rates led to massive inventory losses for it.
The company suffered a net loss of Rs898.46 crore, or (-) Rs3.70 per share, in July-September against a net profit Rs1,683.92 crore, or Rs6.94 per share, IOC Chairman B Ashok said.
Coming back to excise duty, on normal or unbranded petrol, it was hiked from Rs1.20 per litre to Rs2.70 per litre and on unbranded diesel it was increased from Rs1.46 a litre to Rs2.96, a Government notification said.
The same on branded petrol was raised from Rs2.35 a litre to Rs3.85 and on branded diesel from Rs3.75 to Rs5.25 per litre.
"For the moment, we are not passing on the increase in excise duty. It is being absorbed by companies and will be adjusted against review in rates which was due on Saturday," Ashok said.
Before the duty hike, petrol cost Rs64.25 a litre in Delhi and diesel Rs53.35 a litre. They will continue to be priced at the same rate.
"There is no increase in retail prices," he said. While the fall in global rates and the resultant cuts in retail prices have led to loss of revenue to the exchequer, particularly
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 fuel is fixed and not ad valorem.
Unbranded petrol at present attracts a basic excise duty of Rs1.20 per litre, a special additional excise duty of Rs6 a litre and a road cess of Rs2 per litre.
Unbranded diesel attracts a basis excise duty of Rs1.46 a litre and road cess of Rs2 per litre.
The total excise duty on unbranded petrol will rise from Rs9.20 to Rs10.70 per litre and that on unbranded diesel from Rs3.46 to Rs4.96 per litre.