Petrol, diesel prices to rise with additional excise duty and road cess

New Delhi: In what will increase petrol and diesel prices in the country, the union budget has proposed an additional excise duty and road and infrastructure cess of one rupee on every litre of petrol and diesel sold in the country.

“Crude prices have softened from their highs. This gives me a room to review excise duty and cess on petrol and diesel. I propose to increase Special Additional Excise duty and Road and Infrastructure Cess each by two rupee a litre on petrol and diesel,” finance minister Nirmala Sitharaman said in her budget speech.

The cost of the Indian basket of crude, which averaged $47.56 and $56.43 per barrel in FY17 and FY18, respectively, was $ 62.39 in June 2019, according to data from the Petroleum Planning and Analysis Cell (PPAC). The average price was $ 71 a barrel in April. The Indian basket represents the average of Oman, Dubai and Brent crude.

The budget announcement comes in the backdrop of the Organization of the Petroleum Exporting Countries (Opec)-plus arrangement extending its compact for production cuts at a time of supplies from Iran and Venezuela drying up and tension escalating in the Persian Gulf.

Retail prices of petrol and diesel in India track global prices of auto fuels and not crude oil, though they are broadly linked to crude price trends. The average price of petrol and diesel in the international market and the US dollar-rupee exchange rate for the previous 15 days are considered while determining domestic prices. The central government is in favour of bringing petroleum products within the ambit of the goods and services tax (GST), but the move requires the approval of the GST Council.

Petrol prices were deregulated in June 2010 by the Congress-led United Progressive Alliance (UPA) government. Subsequently, Prime Minister Narendra Modi-led government decontrolled diesel prices in October 2014.

Watch | Budget 2019: Petrol and diesel cess increased by Re 2 per litre