The central government on Tuesday cut basic excise duty on petrol and diesel by Rs 2 per litre from October 4. Petroleum and Natural Gas Minister Dharmendra Pradhan had earlier said that fuel prices may come down by Diwali. The move comes a day before Reserve Bank of India (RBI) will unveil its fourth bi-monthly monetary policy statement.
Petrol and diesel prices have gone through the roof ever since the central government announced daily revision of fuel prices. Petrol price in Delhi on Tuesday was at Rs 70.83 per litre, whereas in Mumbai a litre of petrol costs Rs 79.99.
After the excise duty cut, petrol petrol price in Delhi will come down to Rs 68.83, and diesel price to Rs 57.07. The government will incur losses to the tune of Rs 13,000 crore for the remainder of ongoing financial year and Rs 26,000 crore in a full year, said a government statement.
"The government has decided to reduce the basic excise duty rate on petrol and diesel (both branded and unbranded) by Rs 2 per litre with effect from October 4, 2017. This decision has been taken by the Government in order to cushion the impact of rising international prices of crude petroleum oil and petrol and diesel on Retail Sale Prices of Petrol and Diesel as well as to protect the interest of common man," Ministry of Finance said.
This rise in the prices of Petrol and Diesel is also reflected in WPI inflation, which has increased to 3.24% for the month of August 2017, as compared to 1.88% for the month of July 2017. This also prompted the Government to act swiftly in this regard, it added.
The government had steadily increased excise duty on petrol and diesel when the global crude prices had plummeted below $30 a barrel.
The government had in November 2015 and January 2016 raised excise duty on petrol and diesel five times to take away gains arising from plummeting international oil prices. Excise duty on petrol was hiked by Rs 4.02 a litre and that on diesel by Rs 6.97.
Prior to that, the government had in four installments raised the excise duty on petrol and diesel between November 2014 and January 2015 to take away gains arising from fall in international oil prices.
The four excise duty hikes during this period totalled Rs 7.75 per litre on petrol and Rs 6.50 a litre on diesel. It led to about Rs 20,000 crore in additional revenue to the government, helping it meet the fiscal deficit target.
On July 1, the prices of petrol and diesel in the national capital were Rs 63.09 and Rs 53.33 per litre respectively. Excise duty on petrol was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre ever since Prime Minister Narendra Modi-led BJP government came to power in 2014.
The government has excluded petrol and diesel from the ambit of GST (Goods and Service Tax). Petroleum products still attract state and central levies such as excise duty and VAT (Value added tax).