To boost the exchequer’s finances and help contain fiscal deficit — the amount of money that the government borrows to fund its expenses — the Centre on Thursday hiked the excise duty on both petrol and diesel by Rs. 1.50 per litre.
The move will not result in any increase in retail prices of the fuels as state-owned oil companies would offset the hike against an anticipated retail price reduction due to falling global oil prices.
The duty hike will boost government revenue by about Rs. 13,000 crore on an annual basis.
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.
On branded petrol, it 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.
The excise duty hike will not be passed on to consumers and will be adjusted against reduction in rates that was likely this weekend, said B Ashok, chairman, Indian Oil Corp. “For the moment, we are not passing on the increase in excise duty. It is being absorbed by companies and will be adjusted against the review in rates, which was due on Saturday.”
A revision in rates will be considered at the end of November, he said. “As and when we look at price revision, whenever it is due, we will look at the situation and decide on revising rates.”
Normal petrol will continue to cost Rs. 64.25 a litre in Delhi, and normal diesel Rs. 53.35 a litre.
The fall in global oil prices and the resultant reductions in retail prices have hurt state governments, but the Centre has not been impacted as excise duty on the two fuels is fixed, meaning that the same duty is applicable regardless of the prevailing retail price.
Unbranded petrol currently attracts a basic excise duty of Rs. 1.20 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. 1.46 a litre and a road cess of Rs. 2 per litre.
The total excise duty on unbranded petrol will rise from Rs. 9.20 to Rs. 10.70 per litre and that on unbranded diesel from Rs. 3.46 to Rs. 4.96 per litre.