Home / News / India /  Centre raises excise duty on petrol by 10 per litre and on diesel by 13

New Delhi: The government on Tuesday raised the excise duty on petrol by a steep 10 per litre and on diesel by 13 petrol litre to mobilise revenue collections at a time when the global oil prices are extremely low.

Two separate official notifications said that additional excise duty on petrol has been raised by 8 and special additional excise duty of 2 a litre has also been levied on it to give effect to a 10 a litre increase on petrol. In the case of diesel, additional excise duty has been raised by 8 and special additional excise duty by 5. The changes are effective from Wednesday.

A government official said that retail sale prices of petrol and diesel will, however, not change on account of this increase in duties. The price hike will be absorbed by Oil Marketing Companies leading to no increase in retail prices of fuel at the pump.

The government has in the past raised excise duty on petrol and diesel many times to take advantage of the lower oil prices.

“The revenue generated from these duties shall be used for infrastructure and other developmental item of expenditure," said the official, who spoke on condition of anonymity.

The government waited for the lockdown restrictions on movement to partially ease for the latest round of duty revision so that it will actually turn into revenue collections. In March, the government had similarly increased the duty on the two auto fuels by 3 each as fears of a global recession depressed oil prices. India follows a market linked pricing regime called trade parity pricing for petrol and diesel and there is no subsidy. Falling prices, therefore, offer the opportunity to raise taxes without pinching consumers although it deprives them of the benefit of a price fall to the extent of increase in duty. Although retail prices of petrol and diesel are deregulated, the government at times tends to signal to state-run retailers during times of a spike in global oil prices to absorb a part of the required increase in retail price, which could be recouped at a later stage.

Since petrol and diesel are out of GST, individual states also tend to raise the value added tax (VAT) they levy on the fuels when they are in need of higher revenues.

The sharp decline in global crude oil price opened up an unexpected revenue stream for the central and administrations struggling to find resources during an economic slowdown.

Taxes account for a major share of the retail price of petrol and diesel. The Narendra Modi administration had raised excise duty on autofuel several times after coming to power in 2014 to raise resources for welfare schemes.


Gireesh Chandra Prasad

Gireesh has over 22 years of experience in business journalism covering diverse aspects of the economy, including finance, taxation, energy, aviation, corporate and bankruptcy laws, accounting and auditing.
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