Centre looks to mop up gains arising from fall in international oil prices.

Excise duty on petrol and diesel was on Saturday hiked by ₹3 per litre as the government looked to mop up gains arising from fall in international oil prices.

Special excise duty on petrol was hiked by ₹2 to ₹8 per litre and ₹4 in the case of diesel, an official notification said.

News Analysis | Why oil prices are crashing

Additionally, road cess on petrol was raised by ₹1 per litre each on petrol and diesel to ₹10.

The increase in excise duty would in normal course result in a hike in petrol and diesel prices but most of it would be adjusted against the fall in rates that would have necessitated because of slump in international oil prices.

The oil price war from a geopolitical perspective | The Hindu In Focus Podcast

Increase in revenues

Officials said the increase in excise duty will result in annual increase of government revenues by about ₹39,000 crore. The gains during the remaining three weeks of the current fiscal would be less than ₹2,000 crore.

Petrol and diesel prices, which are changed on a daily basis, were cut by 13 paise and 16 paise respectively as oil companies adjusted the excise duty hike against the drop in prices that warrants from international rates slumping the most since the Gulf war.

Petrol now cost ₹69.87 a litre in Delhi and a litre of diesel comes for ₹62.58.

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 ₹1.77 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 ₹2,42,000 crore in 2016-17 from ₹99,000 crore in 2014-15.

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

Government sources said that while the benefit of reduction of crude prices in the first quarter of this year has significantly gone to the consumer, the Centre has taken this step of increasing duty to raise some revenue in view of a tight fiscal situation. This would help in generating the resources for development of infrastructure and other developmental items of expenditure, they said.

Benchmark crude oil prices have halved since January to USD 32 per barrel. In sync with this, the prices of petrol and diesel have also come down by more than ₹ 6 per litre (from ₹ 76.01 a litre on January 11, 2020 to ₹69.87 a litre on March 14 for petrol, and from ₹69.17 to ₹ 62.58 for diesel during the same period in Delhi.