Govt hikes excise duty on petrol and diesel by Rs 1.50 per litre to boost revenues

In order for boosting revenues and contain budget borrowing, the government has raised excise duty on petrol and diesel by Rs 1.50 per litre. While the duty on branded petrol excise was hiked to Rs 3.85/litre from Rs 2.35/litre, that on unbranded petrol was hiked to Rs 2.70/litre from Rs 1.20/litre. Additionally, excise duty for branded diesel was raised to Rs 5.25/litre from Rs 3.75/litre and that of unbranded diesel was hiked to Rs 2.96/litre from Rs 1.46/litre. This development doesn’t come as much of a surprise as reports earlier only had hinted that government was contemplating this move in order to ensure that the benefit of recent sharp decline in international oil prices, should not be limited to customers in the form of price cut in fuel prices, but also to the exchequer. The hike in excise duty is expected to mop up additional revenue of about Rs 14,000 crore to the exchequer. International oil prices have fallen nearly 25% in the past five months, in step with a global commodities decline. The country's average crude import cost, as measured by the Indian crude basket has fallen to $80.87 per barrel (Rs 4,970) on November 7 from $108.05 per barrel (Rs 6,331) on May 26, the day the Narendra Modi government assumed office. Notably, this development comes a little ahead of fortnightly review of the oil marketing companies, Indian Oil Corp (IOC ), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) on Saturday. However, this hike is not expected to burden consumers as oil companies plan to adjust the excise hike with a reduction in retail rates that was due this weekend. So far, there has been a cut of about Rs 8-9 per litre in petrol and Rs 6 in diesel prices from its peak. Petrol price was last cut by Rs 2.41 a litre on November 1. On the same day, diesel rates were reduced by Rs 2.25 per litre.