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The Centre on November 3, on the eve of Diwali, announced a reduction in the excise duty levied on petrol and diesel.
While the excise duty on per litre of petrol has been reduced by Rs 5, the same has been brought down on diesel by Rs 10. The new prices will come into effect from November 4.
The reduction in excise duty is higher on diesel due to its wide usage in the agriculture sector, suggested a statement issued by the Ministry of Finance.
“The reduction in excise duty on diesel will be double that of petrol. The Indian farmers have, through their hard work, kept the economic growth momentum going even during the lockdown phase and the massive reduction in excise on diesel will come as a boost to the farmers during the upcoming Rabi season,” it said.
Every one rupee reduction in excise duty on petrol or diesel leads to a hit of approximately Rs 14,000 crore to the exchequer. Hence, a Rs 5 cut in excise duty on petrol and Rs 10 on diesel would lead to a revenue loss of around Rs 2.10 lakh crore for the Centre.
The opposition parties had, over the past few months, demanded the Centre to bring down the excise duty in view of the escalating fuel prices.
Notably, excise duty on petrol was hiked from Rs 19.98 per litre to Rs 32.9 last year to recoup gain arising from international oil prices plunging to multi-year low as pandemic gulped demand. On diesel, the duty was hiked to Rs 31.80.
While international prices have since recovered to around $85 and demand returned, excise duty has remained at the same level. This has resulted in petrol price soaring above Rs 100-a-litre-mark in all major cities and diesel crossing that level in more than one-and-a-half dozen states.
The per litre rate of petrol has breached the Rs 110-mark in Delhi and Rs 115-mark in Mumbai, whereas, diesel is being sold at Rs 98.42 per litre in the national capital and Rs 106.62 in Mumbai.
The consumption of fuel has also accelerated in India over the past few months, since the second wave of the COVID-19 pandemic receded.
According to the Centre, the excise duty reduction on fuel will not only relieve the consumers but is also expected to “spur the overall economic cycle”.
“All sectors of the economy – be it manufacturing, services or agriculture – are experiencing significant upward economic activity. To give a further fillip to the economy, the Government of India has decided to significantly reduce the excise duty on diesel and petrol,” it said.
“The reduction in excise duty on petrol and diesel will also boost consumption and keep inflation low, thus helping the poor and middle classes. Today’s decision is expected to further spur the overall economic cycle,” the finance ministry added.
The Centre has also urged the state governments to take cue from its decision to cut excise duty and “commensurately reduce VAT on petrol and diesel to give relief to consumers”.
“The states should add to this celebration by reducing VAT on fuel to give further relief to consumers,” Union Petroleum Minister Hardeep Singh Puri tweeted.
I thank PM @narendramodi Ji for the significant reduction in Excise Duty on Petrol & Diesel. A big relief for fuel consumers, particularly our farmers just ahead of Rabi season. The states should add to this celebration by reducing VAT on fuel to give further relief to consumers.
— Hardeep Singh Puri (@HardeepSPuri) November 3, 2021
The government, in its statement, cited the surging international crude oil rates as the prime reason behind the massive hike in domestic fuel prices.
“In recent months, crude oil prices have witnessed a global upsurge. Consequently, domestic prices of petrol and diesel had increased in recent weeks exerting inflationary pressure. The world has also seen shortages and increased prices of all forms of energy. The Government of India has made efforts to ensure that there is no energy shortage in the country and that commodities such as petrol and diesel are available adequately to meet our requirements,” it said.
(With PTI inputs)
