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Excise duty on petrol, diesel up by Rs 1.50
Tribune News Service

New Delhi, November 13
In a bid to boost revenue, the government today hiked the excise duty on petrol and diesel by Rs 1.50 a litre which will temper future price cuts at the retail level.

Indian Oil Corporation (IOC) announced that the excise duty hike will not be passed on to consumers and will be adjusted against reduction in rates, likely by this weekend. “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 is due on Saturday,” IOC chairman B Ashok said.

The move is expected to garner additional revenue of around Rs 13,000 crore. With tax collections being not so buoyant and a stiff fiscal deficit target of 4.1 per cent, the government is hoping to mop up revenue at a time when crude oil prices are nosediving.

While the prices of diesel and petrol have not been hiked in line with the excise duty hike, the subsequent cut in prices expected this fortnight may not happen and prices may remain as they are.

The slump in global oil prices has resulted in six consecutive reduction in petrol prices since August and two in diesel in the last one month.

Excise duty on normal or unbranded petrol was hiked from Rs 1.20 per litre to Rs 2.70 per litre and unbranded diesel from Rs 1.46 a litre to Rs 2.96, a government notification said.

The same on branded petrol was raised from Rs 2.35 a litre to Rs 3.85 and on branded diesel from Rs 3.75 to Rs 5.25 per litre.

India Ratings said in a note that the increase in excise duty on petrol and diesel will be moderated if petrol and diesel prices are further slashed, later this week, as expected. Retail prices will likely remain at around the same levels or increase only marginally once the excise increase and expected price cut take effect.

The increase in excise duty is driven by soft crude prices which have given room to the government to increase excise without affecting retail prices. The government had been passing on the soft crude benefit to consumers via successive cuts in retail prices of fuel.