Excise duty on petrol, diesel hiked; no change in retail price

The government on Thursday raised excise duty on petrol and diesel by Rs2 per litre each, forcing oil firms to skip a further reduction in the prices of the two fuels that had become due as international prices of crude oil continued to fall.

The third excise duty hike since November will help government raise an additional Rs6,000 crore during remaining three months of the current fiscal as the government looks to bridge it fiscal gap amidst slow growth in tax collections.

The excise duty hike has now been set off against the reduction in rates that was due because of slide in oil prices.

The slump in global oil rates had warranted a price cut of Rs3.22 per litre of petrol and about Rs3 per litre of diesel.

Even after adjusting for the excise increase, oil firms would have netted a margin of over Re1 per litre.

The government, however, says the excise duty hike that comes into effect from 2 January 2015 is meant to fund infrastucture development programmes of the government.

''In order to fund the ambitious infrastructure development programme of the government, particularly the building of 15,000 km of roads, during current and next financial year, the government has decided to increase basic excise duty on petrol and diesel (both branded and unbranded) by Rs2 per litre,'' an official release said.

Together with the Rs1.50 a litre hike in excise duty effected on both products from 12 November and Rs2.25 per litre increase in duty on petrol and Re1 on diesel from 2 December, the government will mop up about Rs17,000 crore this fiscal.