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Wednesday, June 03, 2020

Excise hiked on fuel, but retail prices will not rise

Finance Ministry officials said the hike in excise duty, which comes into effect from Wednesday, will not result in hike in retail prices of petrol and diesel for the consumers.

Written by Aanchal Magazine | New Delhi | Updated: May 6, 2020 12:43:14 pm
petrol price hike, diesel price hike, excise duty petrol, excise duty fuels, The added costs won’t be passed on to the consumers, the government has clarified. (File Photo)

The government Tuesday announced a Rs 13 a litre hike in excise duty on diesel and a Rs 10 a litre hike in excise duty on petrol in an attempt to shore up revenues as demand remains subdued due to the lockdown. Finance Ministry officials said the hike in excise duty, which comes into effect Wednesday, will not result in an increase in retail prices for the consumers.

This is the second hike in excise duty on fuel in two months by the Centre and comes after a hike in value added tax by several states over the last few days.

A government notification said the special excise duty on petrol was hiked by Rs 2 a litre to Rs 12 a litre and by Rs 5 a litre to Rs 9 a litre for diesel. Road cess on both petrol and diesel has also been increased by Rs 8 a litre to Rs 18 a litre.

The government had on March 14 hiked the excise duty, and road and infrastructure cess by Rs 3 a litre each for both petrol and diesel.

Government sources said the revenue generated from these duties would be used for infrastructure and other developmental expenditure.

In its amendments to the Finance Act, the government had in March increased the cap on special additional excise duty by Rs 8 a litre on both petrol and diesel, taking the cap to Rs 18 a litre on petrol and Rs 12 a litre on diesel. This gave it the flexibility to raise duties on petrol and diesel by another Rs 8 per litre each.

Roughly, every rupee hike in excise duty is expected to yield Rs 13,000-14,000 crore annually. This round of hike in excise duties is likely to result in revenue gain of around Rs 2.85 lakh crore this fiscal.

Retail prices of petrol and diesel had already gone up in Delhi after a hike in VAT by the Delhi government. After the hike in excise duties, the price of diesel jumped by Rs 7.1 a litre to Rs 69.4 and that of petrol rose by Rs 1.7 a litre to Rs 71.3 in Delhi.

Since the beginning of this year, international crude prices have crashed by around 57 per cent from $66.25 per barrel to $28.5 per barrel. Post the hike, the Central and state taxes account for 55 per cent of the price of petrol and 50.5 per cent of the price of diesel at pumps in the capital.

The Delhi government’s move came on the heels of VAT hikes on petrol and diesel in Tamil Nadu and Haryana. On Sunday, the Tamil Nadu government raised VAT on petrol and diesel resulting in a price hike of Rs 3.25 a litre of petrol and Rs 2.50 a litre of diesel. Haryana hiked VAT on petrol by Re 1 a litre and VAT on diesel by Rs 1.1 a litre last week.

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