Government hikes excise duty on petrol by Rs 10 per litre & diesel by Rs 13 per litre

The government on Tuesday hiked the excise duty on petrol and diesel by a record Rs 10 per litre and Rs 16 per litre respectively at a time when there is a slump in international prices. It will help the government to earn Rs 1.6 lakh crore as additional revenue. The hike in duty has taken away gains from falling global crude oil prices.

The retail prices of petrol and diesel will, however, not be impacted on account of tax changes. The price hike will be absorbed by Oil Marketing Companies leading to no increase in retail prices of fuel at the pump.

Two separate official notifications said special additional excise duty on petrol has been hiked by Rs 2 per litre and road cess has been hiked by Rs 8 a litre and in the case of diesel, special additional excise duty has been hiked by Rs 5 per litre and road cess has been raised by Rs 8 a litre. The changes are effective from Wednesday.

With this, the total incidence of excise duty on petrol has risen to Rs 32.98 per litre and that on diesel to Rs 31.83.

The excise duty on fuel has been hiked two times since March 2020 amid a fall in international oil prices. It had raised excise duty on petrol and diesel by Rs 3 per litre each in March to garner about Rs 39,000 crore.

Fuel prices have not been revised since March 16 despite a heavy fall in oil prices in the international prices, which fell to a two-decade low.

Previous Hikes in Excise duty on fuel

The excise duty on petrol and duty has been hiked on nine occasions between November 2014 and January 2016. These hikes helped the government to mop up excise to Rs 2 lakh 42 thousand crores in this period from Rs 99 thousand crores in 2014-15. The hikes were made to take away the gains arising from plummeting global oil prices.

It cut excise duty by Rs 2 in October 2017 and by Rs 1.50 a year later. But it raised excise duty by Rs 2 per litre in July 2019.

Reports suggest that the government has taken this step of increasing duty to raise some revenue given to a tight fiscal situation. This would help in generating the resources to meet the expense of coronavirus fight.