Under Opposition fire over fuel prices, the Centre today reduced the basic excise duty on petrol and diesel by Rs 2 per litre effective Wednesday — the first time the NDA government has reduced excise duty on petrol and diesel after having raised it 11 times since November 2014.
A senior Finance Ministry official said on Tuesday that the Central government will nudge states to also reduce Value Added Tax (VAT) on petrol and diesel. “The Government of India has decided to reduce the Basic Excise Duty rate on Petrol and Diesel (both branded and unbranded) by Rs 2 per litre with effect from 4th October, 2017. This decision has been taken by the Government in order to cushion the impact of rising international prices of crude petroleum oil and petrol and diesel on Retail Sale Prices of Petrol and Diesel as well as to protect the interest of common man,” the Finance Ministry said in a statement on Tuesday.
On September 20, Finance Minister Arun Jaitley had ruled out the possibility of the Centre cutting taxes on petrol and diesel, stressing that the government needs funds for infrastructure projects. Jaitley had urged the states to reduce their VAT on fuel. “We need excise revenues to push public investment, and if any state wants to reduce excise they can do so,” Jaitley said. From textiles to I-T: Wave of job losses hits new and old economy
The duty reduction will result in an estimated revenue loss of Rs 13,000 crore during the remaining part of the financial year. “The revenue loss on account of these reductions in excise duty is about Rs 26,000 crore in a full year, and about Rs 3000 crore during the remaining part of the current financial year,” it said. Retail price of petrol and diesel in Delhi had surged to Rs 70.83 per litre and Rs 59.07 per litre respectively, on October 2.
“We are planning something on petrol and diesel… (and) are bringing out the notification. The surge in prices is due to the pick in international prices. The rise in international prices has to be managed with excise and VAT only — excise and VAT will have to be reduced,” the official said. With the Centre cutting excise duty, it expects the states to follow suit and reduce VAT rates to provide further relief to consumers.Daily price change: Fuel rates up 8 per cent since mid-June, says Icra
The finance ministry said that the rise in the prices of petrol and diesel was also reflected in Wholesale Price Index-based inflation, which rose 3.24 per cent in August, as compared to 1.88 per cent in July, prompting the government to reduce duty. Excise duty on petrol and diesel was Rs 9.48 and Rs 3.56 a litre respectively before the NDA government took office, which has gone up to Rs 21.48 and Rs 17.33 a litre, respectively, an increase of 226 per cent and 486 per cent, respectively, over the May 2014 level.