Govt hikes excise duty on petrol, diesel to raise an additional Rs2,500 cr

A day after state-run oil marketing companies reduced retail selling prices of petrol and diesel by 50 paise per liter and 46 paise per litre, respectively, the government today announced an increase in the excise duty on petrol by 30 paise per litre and on diesel by Rs1.17 a litre in a bid to raise Rs2,500 crore in additional revenue.

Accordingly, the basic excise duty on unbranded petrol will go up from Rs7.06 per litre to Rs7.36 and on unbranded diesel from Rs4.66 to Rs5.83 per litre.

The total levy on unbranded petrol, including additional and special excise duty, will be Rs19.36 per litre against Rs19.06 at present.

Similarly, the total levy on unbranded diesel, after including special excise duty will be Rs11.83 per litre against Rs10.66 at present.

Basic excise duty on branded petrol will go up from Rs8.24 per litre to Rs8.54 a litre while that on branded diesel will go up from Rs7.02 to Rs8.19 per litre.

Together, the increases in excise duty on petrol and diesel will yield additional revenues of around Rs2,500 crore during the remainder of the 2015-16 fiscal ending 31 March 2016, finance minister Arun Jaitley said.

This is the second increase in excise duty since 7 November when the government raised excise duty on petrol by Rs1.60 per litre and on diesel by 30 paise a litre. The government is reported to have mopped up Rs3,200 crore from that duty hike.

The two duty hikes will together yield Rs5,700 crore in additional revenue for the government, which is facing a likely shortfall in direct tax mobilisation.

Earlier, the government had raised excise duty on petrol and diesel in four installments between November 2014 and January 2015 to take away the reduction in retail rates passed on by OMCs from falling prices of crude oil.