Parliament has approved an enabling provision that allows the government to increase excise duty on petrol and diesel by Rs 8 per litre any time it wishes. Finance Minister Nirmala Sitharaman moved an amendment to the Finance Bill, 2020, to raise the limit up to which the government can raise special excise duty on petrol and diesel to Rs 18 per litre and Rs 12 per litre, respectively. The earlier limit was Rs 10 per litre for petrol and Rs 12 per litre for diesel.
This amendment was passed without debate. The additional revenue thus generated can be utilised to meet unexpected expenses incurred during the coronavirus outbreak.
The government had on March 14 raised excise duty on petrol and diesel by Rs 3 per litre each. This excise duty hike was expected to raise an additional Rs 39,000 crore in revenue annually. This duty hike included Rs 2 a litre increase in special additional excise duty and Re 1 in road and infrastructure cess. This hike took the special additional excise duty to maximum permissible limit in law - Rs 10 in case of petrol and Rs 4 in case of diesel. Now, through an amendment to the Eighth Schedule of the Finance Act, this limit has been increased to Rs 18 per litre in case of petrol and Rs 12 in case of diesel.
This is an enabling provision and no change in excise duty is being done as of now, an official clarified. The amendment gives powers to the government to raise the duty by up to Rs 8 per litre in petrol and diesel at any time it wishes, but it is not happening right now.
These excise duty hikes come on the back of decline in crude oil prices amid a price war between Saudi Arabia and Russia. While earlier fall in crude prices this year had been passed on to the customer, the government is looking to cash in on the recent one to shore up funds in view of the coronavirus outbreak. The funds collected from the excise duty hike will be utilised for meeting emergency expenses during the current contagion.
"The increased excise revenue from oil should not be used for bridging the fiscal gap and pleasing the markets; rather sound economics demands it must be used as a fiscal package for income support to the people working in the unorganised sector who are already facing the brunt of loss of jobs," a recent SBI Ecowrap report said.