Excise Hike on Petrol and Diesel, Consumers Unaffected

In a new development, the Central Government has hiked the excise duty on petrol and diesel. The BJP led NDA government on Tuesday evening hiked excise duty on petrol by a record Rs 10 per litre and Rs 13 on Diesel. The government wants to add more revenues and the excise duty hike will add an estimated Rs 1.6 Lakh to its coffers. The hike comes into play due to the decrease in demand as the lockdown remains enforced across the country. The excise duty hike won’t impact the Indian consumer as there won’t be any increase in the retail prices. 

This is the second hike in the excise duty in the last 2 months by Narendra Modi helmed Central government. Several states including Delhi and Haryana have hiked Value Added Tax (VAT) in the recent days to shore up their falling revenues due to lack of economic activity. A government notification tells us that the special excise duty on petrol was hiked by Rs 2 a litre to Rs 12 a litre and by Rs 5 a litre to Rs 9 a litre for diesel. Road cess on both petrol and diesel has seen a record hike by Rs 8 a litre to Rs 18 a litre.

Earlier, on 14th March 2020, the Central Government increased the excise duty, road and infrastructure cess by Rs 3 a litre each for both petrol and diesel. 

The government had amended the Finance Act, it in March increased the cap on special additional excise duty by Rs 8 a litre on both petrol and diesel. The cap was increased to Rs 18 a litre on petrol and Rs 12 a litre on diesel. The government has the necessary flexibility to raise duties on petrol and diesel by another Rs 8 per litre each. 

If we look at the maths behind the calculation, every rupee hike in excise duty is expected to generate Rs 13,000-14,000 crore annually. The latest hike is likely to result in a revenue gain of around Rs 2.85 lakh crore this fiscal. The money will be used to fund the different infrastructure and development projects. 

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