Finance Bill provides for rise of ₹5/litre

While the Budget has effected a hike in the duties and cess on petrol and diesel amounting to ₹2 per litre, the government has given itself the leeway for a further increase of levies by ₹5 per litre, Revenue Secretary Ajay Bhushan Pandey said.

While Finance Minister Nirmala Sitharaman had announced a ₹1/litre increase in the Special Additional Duty (SAD) on petrol and diesel and a ₹1/litre increase in the Road and Infrastructure Cess on the fuels in Friday’s Budget speech, the Finance Bill, which converts the Budget announcements into law, specified a higher increase in both the SAD and the Road and Infrastructure Cess, Mr. Pandey indicated to The Hindu.

According to the Budget announcement, the SAD would increase to ₹8 per litre for petrol and ₹2 per litre for diesel. The cess would increase to ₹9 per litre for both fuels.

However, Clause 185 of the Finance Bill, which converts the Budget announcements into law, specified a higher increase in both the SAD and the Road and Infrastructure Cess. Clause 185 of the Bill… seeks to increase the rate of special additional duty of excise on motor spirit, commonly known as petrol, from ₹7 per litre to ₹10 per litre [and] increase the rate of special additional duty of excise on high speed diesel oil from ₹1 per litre to ₹4 per litre.

Similarly, Clause 201 of the Finance Bill seeks to “increase the rate of road and infrastructure cess on motor spirit commonly known as petrol and high speed diesel oil, from ₹8 per litre to ₹10 per litre”.

Taken together, this would amount to a ₹5 per litre increase in the levies on the two fuels. While oil marketing companies have been instructed to only incorporate a total hike of ₹2 per litre for the moment, the wording in the Finance Bill gives the government room to increase up to ₹ 5 per litre whenever it wants.

“The ceiling has been increased,” Mr Pandey told The Hindu. “Only the ceiling has been increased because you cannot go on changing the ceiling every time. Depending on the requirement, either the decision can be taken to either bring down the taxes or for them to go up.”

Mr Pandey added that the government expects to earn ₹30,000 crore in a year due to the increase in levies on fuel, and about ₹ 22,000 crore from the remaining nine months of this financial year.