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Excise duty cut: Petrol price slashed by INR 8.69/L, diesel by INR 7.05/L

6092
By PTI Updated: May 22, 2022 6:31 pm
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New Delhi, May 22 (PTI): Petrol price on Sunday was slashed by INR 8.69 a litre and diesel by INR 7.05 per litre following the government cutting excise duty on auto fuels to give relief to consumers battered by high fuel prices that has also pushed inflation to record high.

The government on Saturday announced a record INR 8 per litre cut in excise duty on petrol and INR 6 per litre reduction on diesel.

The excise duty cut will translate into a reduction of INR 8.69 a litre on petrol in Delhi and INR 7.05 per litre in diesel after taking into account its impact on other levies.

Petrol in the national capital now costs INR 96.72 a litre as against INR 105.41 previously. Diesel is now priced at INR 89.62 per litre as opposed to INR 96.67 earlier, a price notification from state-owned fuel retailers showed.

In Mumbai, petrol rates have been slashed to INR 111.35 a litre from INR 120.51, while diesel rates have come down to INR 97.28 per litre from INR 104.77.

Rates differ from state to state depending on incidence of local taxes such as VAT.

Petrol now costs INR 106.03 a litre in Kolkata (earlier INR 115.12) and INR 102.63 in Chennai (previously INR 110.85). Diesel is priced at INR 92.76 a litre in Kolkata (previously INR 99.83) and INR 94.24 in Chennai (earlier INR 100.94).

Announcing the duty cut through tweets, Finance Minister Nirmala Sitharaman had also stated that the government will give INR 200 per cylinder subsidy to the poor who got cooking gas connection under the Ujjwala scheme, for 12 cylinders in a year to help ease some of the burden arising from cooking gas rates rising to record levels.

A 14.2-kg LPG cylinder costs INR 1,003 in the national capital. Pradhan Mantri Ujjwala Yojana beneficiaries will get INR 200 subsidy directly in their bank account and the effective price for them would be INR 803 per 14.2-kg cylinder.

There was no subsidy paid on cooking gas since June 2020, and all users including Ujjwala beneficiaries bought cylinders at market rate, which currently is INR 1,003 in Delhi.

The INR 200 subsidy will cost the government INR 6,100 crore, she had said.

State-owned fuel retailers passed on the excise duty cut to consumers despite losing INR 13.08 a litre on petrol and INR 24.09 per litre on diesel because of holding rates even though raw material (crude oil) cost surged.

This excise duty cuts along with INR 5 cut on petrol and INR 10 reduction on diesel affected from November 4, 2021, rolls back the INR 13 and INR 16 per litre increase in taxes on petrol and diesel effected between March 2020 and May 2020 to avoid passing on to consumers the sharp fall in international oil prices.

The excise duty hikes of 2020 had taken central taxes on petrol to their highest level of INR 32.9 per litre and that on diesel to INR 31.8 a litre.

After the latest excise cut, the incidence of central tax on petrol will come down to INR 19.9 a litre and that on diesel to INR 15.8 per litre.

She exhorted all state governments to also cut local sales tax or VAT.

Post November 2021 reduction in excise duty on petrol by INR 5 per litre and that on diesel by INR 10 a litre, 25 states and UTs had cut VAT to give further reprieve to consumers battered by record-high retail prices.

However, states ruled by non-NDA parties like Maharashtra, Andhra Pradesh, West Bengal, Kerala and Tamil Nadu had not reduced VAT.

Post that reduction, state-owned oil firms held petrol and diesel prices for a record 137-day period during which international oil prices rose from USD 84 per barrel to near 14-year high of USD 140 per barrel.

They finally broke the hiatus with INR 10 per litre increase on both petrol and diesel in 16 days starting March 22, but again hit a freeze button after the last revision on April 6, despite not covering all of the cost.

Brent – the world’s most known crude benchmark – was at USD 112.55 per barrel on Sunday.

Holding of prices despite rise in cost had led to lower earnings of fuel retailers in the January-March quarter.

Central excise duty makes up for 20 per cent of the price of petrol, down from 26 per cent earlier. It now makes up for 17.6 per cent of diesel price. After considering local sales tax or VAT, the total tax incidence in the price of petrol is 37 per cent and that on diesel is 32 per cent, down from 40-42 per cent earlier.

The excise tax on petrol was INR 9.48 per litre when the Modi government took office in 2014 and that on diesel was INR 3.56 a litre.

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 INR 11.77 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 INR 2,42,000 crore in 2016-17 from INR 99,000 crore in 2014-15.

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

It again raised excise duty on March 14, 2020 by INR 3 per litre each. The government on May 6, 2020, again raised excise duties by INR 10 per litre on petrol and INR 13 per litre on diesel.

6092
By PTI Updated: May 22, 2022 6:31:08 pm