Govt Cuts Petrol Excise to ₹3/litre, Scraps Diesel Duty
Petrol excise reduced from ₹13 to ₹3 per litre, while diesel duty is brought down from ₹10 to zero in a major tax relief move.
New Delhi: In a huge relief to the common man, the government on Friday absorbed oil shocks, keeping petrol and diesel prices unchanged amid a sharp rise in global crude oil prices amid ongoing geopolitical tensions in West Asia. Though the government put a strain on the finances of oil marketing companies, it decided to protect consumers from the rising cost pressure. In order to provide relief to oil companies, the government also cut excise duty on petrol and diesel by Rs 10 per litre each, at an estimated revenue cost of Rs 1.75 lakh crore.
The government said in a notification that special additional excise duty on petrol has been cut from Rs 13 a litre to Rs 3 and the same on diesel from Rs 10 per litre to nil. In a balancing act, it has also imposed additional export duties on diesel and jet fuel or aviation turbine fuel (ATF), a move aimed at ensuring adequate domestic supply. “An additional duty of Rs 21.50 per litre has been levied on diesel exports and Rs 29.50 per litre on ATF exports,” it said.
However, unlike last time, there is no windfall tax that has been levied on domestic crude oil producers like state-owned oil and gas retailer ONGC. After the reduction in excise duty, it is, however, expected that the incidence of excise duty on petrol will be Rs 11.9 per litre (Rs 1.40 basic excise duty, Rs 3 special additional excise duty, Rs 2.50 agriculture infrastructure and development cess and Rs 5 road and infrastructure cess). On diesel the incidence will be Rs 7.80 per litre (Rs 1.80 basis excise duty, Rs 4 agriculture infrastructure and development cess and Rs 2 road and infrastructure cess).
Soon after the announcement of excise duty cut, petroleum and natural gas minister Hardeep Singh Puri said that the government has chosen to absorb the financial impact rather than pass on the full burden of rising fuel costs to consumers. At the same time, Union finance minister Nirmala Sitharaman also reacted to the imposition of additional export duties on diesel and ATF, saying that the duties were levied to ensure sufficient availability of these fuels for domestic consumption in the country.
The excise duty cut also follows record losses that oil companies suffered from the surge in international oil prices. Prices of crude oil, the raw material for making petrol and diesel, have surged almost 50 per cent this month due to supply disruption in the West Asia war. Considering 175 billion litre of auto fuel sales annually — 115 billion litres of diesel and 60 billion litres of petrol, the impact of the duty cut is estimated to be Rs 1.75 lakh crore per year. “However, the country’s financial implications of reduction of excise duty on petrol diesel will cost the exchequer of around Rs 5,500 crore in 15 days," said CBIC chairman Vivek Chaturvedi in an interview.
On the skyrocketing global crude surge, Puri further said that international crude prices have gone through the roof in the last one month from around $70 dollars per barrel to around $122. “Consequently, petrol and diesel prices for consumers have gone up all over the world. Prices have increased by around 30-50 per cent in Southeast Asian countries, 30 per cent in North American countries, 20 per cent in Europe and 50 per cent in African countries,” he compared, saying that the government had two choices — either increase prices drastically or bear the brunt on its finances.
Besides, it has been observed that international oil prices touched $119 per barrel earlier this month alone on the intensifying the Gulf war, before pulling back to around $100 a barrel. “If the average crude oil price goes up to $100-105 per barrel, fuel retailers would incur a loss of Rs 11 per litre on petrol and Rs 14 per litre on diesel, respectively,” said rating agency ICRA.