Excise duty cut: Petrol price slashed by Rs 8.69/ltr, diesel by Rs 7.05/ltr

 Petrol price on Sunday was slashed by Rs 8.69 a litre and diesel by Rs 7.05 per litre following the government cutting excise duty on auto fuels to give relief to consumers battered by high fuel prices that has also pushed inflation to record high.

The government on Saturday announced a record Rs 8 per litre cut in excise duty on petrol and Rs 6 per litre reduction on diesel.

The excise duty cut will translate into a reduction of Rs 8.69 a litre on petrol in Delhi and Rs 7.05 per litre in diesel after taking into account its impact on other levies.

Petrol in the national capital now costs Rs 96.72 a litre as against Rs 105.41 previously. Diesel is now priced at Rs 89.62 per litre as opposed to Rs 96.67 earlier, a price notification from state-owned fuel retailers showed.

In Mumbai, petrol rates have been slashed to Rs 111.35 a litre from Rs 120.51, while diesel rates have come down to Rs 97.28 per litre from Rs 104.77.

Rates differ from state to state depending on incidence of local taxes such as VAT.

Petrol now costs Rs 106.03 a litre in Kolkata (earlier Rs 115.12) and Rs 102.63 in Chennai (previously Rs 110.85). Diesel is priced at Rs 92.76 a litre in Kolkata (previously Rs 99.83) and Rs 94.24 in Chennai (earlier Rs 100.94).

Announcing the duty cut through tweets, Finance Minister Nirmala Sitharaman had also stated that the government will give Rs 200 per cylinder subsidy to the poor who got cooking gas connection under the Ujjwala scheme, for 12 cylinders in a year to help ease some of the burden arising from cooking gas rates rising to record levels.

A 14.2-kg LPG cylinder costs Rs 1,003 in the national capital. Pradhan Mantri Ujjwala Yojana beneficiaries will get Rs 200 subsidy directly in their bank account and the effective price for them would be Rs 803 per 14.2-kg cylinder.

There was no subsidy paid on cooking gas since June 2020, and all users including Ujjwala beneficiaries bought cylinders at market rate, which currently is Rs 1,003 in Delhi.

The Rs 200 subsidy will cost the government Rs 6,100 crore, she had said.

State-owned fuel retailers passed on the excise duty cut to consumers despite losing Rs 13.08 a litre on petrol and Rs 24.09 per litre on diesel because of holding rates even though raw material (crude oil) cost surged.

This excise duty cuts along with Rs 5 cut on petrol and Rs 10 reduction on diesel affected from November 4, 2021, rolls back the Rs 13 and Rs 16 per litre increase in taxes on petrol and diesel effected between March 2020 and May 2020 to avoid passing on to consumers the sharp fall in international oil prices.

The excise duty hikes of 2020 had taken central taxes on petrol to their highest level of Rs 32.9 per litre and that on diesel to Rs 31.8 a litre.

After the latest excise cut, the incidence of central tax on petrol will come down to Rs 19.9 a litre and that on diesel to Rs 15.8 per litre.

She exhorted all state governments to also cut local sales tax or VAT.

Post November 2021 reduction in excise duty on petrol by Rs 5 per litre and that on diesel by Rs 10 a litre, 25 states and UTs had cut VAT to give further reprieve to consumers battered by record-high retail prices.

However, states ruled by non-NDA parties like Maharashtra, Andhra Pradesh, West Bengal, Kerala and Tamil Nadu had not reduced VAT.

Post that reduction, state-owned oil firms held petrol and diesel prices for a record 137-day period during which international oil prices rose from USD 84 per barrel to near 14-year high of USD 140 per barrel.

They finally broke the hiatus with a Rs 10 per litre increase on both petrol and diesel in 16 days starting March 22, but again hit a freeze button after the last revision on April 6, despite not covering all of the cost.

Brent – the world’s most known crude benchmark – was at USD 112.55 per barrel on Sunday.

Holding of prices despite rise in cost had led to lower earnings of fuel retailers in the January-March quarter.

Central excise duty makes up for 20 per cent of the price of petrol, down from 26 per cent earlier. It now makes up for 17.6 per cent of diesel price. After considering local sales tax or VAT, the total tax incidence in the price of petrol is 37 per cent and that on diesel is 32 per cent, down from 40-42 per cent earlier.

The excise tax on petrol was Rs 9.48 per litre when the Modi government took office in 2014 and that on diesel was Rs 3.56 a litre.

The government had between November 2014 and January 2016 raised excise duty on petrol and diesel on nine occasions to take away gains arising from plummeting global oil prices.

In all, duty on petrol rate was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months that helped government’s excise mop up more than double to Rs 2,42,000 crore in 2016-17 from Rs 99,000 crore in 2014-15.

It cut excise duty by Rs 2 in October 2017 and by Rs 1.50 a year later. But it raised excise duty by Rs 2 per litre in July 2019.

It again raised excise duty on March 14, 2020 by Rs 3 per litre each. The government on May 6, 2020, again raised excise duties by Rs 10 per litre on petrol and Rs 13 per litre on diesel.