Excise duties increased on fuel, but retail prices will not rise

The additional costs will not be passed on to consumers, the government has clarified. (File photo)

The government announced on Tuesday an increase of Rs 13 per liter in excise duties on diesel and an increase of Rs 10 per liter in excise duties on gasoline in an attempt to shore up revenue as demand remains subdued due to blocking. Finance ministry officials said the increase in excise duties, which will take effect on Wednesday, will not lead to an increase in retail prices for consumers.

This is the second increase in the excise tax on fuel in two months by the Center and comes after a rise in value added tax by several states in recent days.

A government notice said the special excise tax on gasoline was increased from Rs 2 per liter to Rs 12 per liter and from Rs 5 per liter to Rs 9 per liter for diesel. Road access in both gasoline and diesel has also increased from Rs 8 per liter to Rs 18 per liter.

On March 14, the government increased the excise tax and the cessation of infrastructure and roads by 3 rupees per liter, for both gasoline and diesel.

Government sources said the income generated by these obligations would be used for infrastructure and other development expenses.

In its amendments to the Finance Law, the government had increased the special excise limit in March by 8 rupees per liter on both gasoline and diesel, bringing the limit to Rs 18 per liter on gasoline and Rs 12 per liter on diesel . This gave him the flexibility to raise taxes on gasoline and diesel by another Rs.8 per liter each.

Approximately each rupee increase in excise duties is expected to yield between Rs 13 billion and Rs 14 billion annually. This round of hike in excise taxes is likely to generate gains of around Rs 2.85 lakh crore this fiscal year.

Retail gasoline and diesel prices had already risen in Delhi after a VAT increase by the Delhi government. After the increase in excise duties, the price of diesel increased by Rs 7.1 per liter to Rs 69.4 and that of gasoline increased by Rs 1.7 per liter to Rs 71.3 in Delhi.

Since the beginning of this year, international crude oil prices have plunged 57 percent, from $ 66.25 a barrel to $ 28.5 a barrel. After the rise, central and state taxes account for 55 percent of the price of gasoline and 50.5 percent of the price of diesel at pumps in the capital.

The Delhi government measure came immediately after the VAT increase on gasoline and diesel in Tamil Nadu and Haryana. On Sunday, the Tamil Nadu government raised VAT on gasoline and diesel, resulting in a price increase of Rs 3.25 per liter of gasoline and Rs 2.50 per liter of diesel. Haryana raised VAT on gasoline by Re 1 per liter and VAT on diesel by Rs 1.1 per liter last week.

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