Excise Duty On Petrol & Diesel Increased; No Impact on Prices

The government today raised excise duty on petrol by Rs 2.25 per litre and by Rs 1 a litre on diesel but retail pump rates will not be increased as oil firms decided to absorb the duty change for the time being.

The second excise duty hike in three weeks will help raise additional Rs 4,000 crore in four months to March as the government seeks to take advantage of a slump in world oil prices to shore up its revenues without stoking inflation.

Together with Rs 1.50 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.

"This (excise duty hike) is not being passed on to the consumers," Indian Oil Corp (IOC) Chairman B Ashok told PTI.

"Since we had only yesterday revised petrol and diesel prices, we decided a change so soon is not warranted."

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.

Asked if oil companies while revising rates yesterday had factored in a possible excise duty hike, he said the price cut was a true reflection of fall in international oil rate - from USD 93.23 per barrel in first fortnight of November to USD 87.21 in second half, and devaluation of rupee value - from Rs 61.46 to a US dollar to Rs 61.80.

"We are absorbing the excise duty increase for now. We are keeping track of the changing scenario and will take appropriate steps as the situation warrants at the next revision (due in mid-December)," Ashok said.

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 from Rs 2.96 a litre to Rs 3.96. 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 of Rs 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.

Brent rates, the benchmark grade for more than half of the world's oil, have dropped to USD 68.34 a barrel, the lowest level since October 2009. Prices declined 18 per cent last month and are 38 per cent lower in 2014.

State-owned fuel retailers Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL), following the fortnightly review practice revised rates on Sunday.

Petrol price was cut by 91 paisa a litre and diesel by 84 paisa. The seventh reduction in price since August has meant that petrol costs Rs 63.33 a litre in Delhi, Rs 10.27 per litre less than what it cost in July.

The third reduction in diesel rates in one month has led to the price coming down to Rs 52.51 a litre.

Oil firms revise rates of petrol, which was deregulated in June 2010, and diesel on 1st and 16th of every month based on average international oil price and rupee-US dollar exchange rate.