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This is the second hike in excise duty in less than two weeks as the government looks to make use of the slump in oil prices to shore up resources at a time when its divestment kitty is likely to fall way short of target.
The government on Friday hiked excise duty on petrol by Rs 0.75 per litre and by Rs 2 a litre on diesel, the second increase in duties in less than two weeks, to mop up over Rs 3,700 crore (Rs 37 billion) in additional revenue.
The excise duty hike took away most of the gains, which should have accrued to consumers from international oil prices slumping to 12 year low.
The reduction was limited to 32 paise a litre in petrol and 85 paise in diesel because of the excise duty hike.
Basic excise duty on unbranded or normal petrol has been increased from Rs 7.73 per litre to Rs 8.48 and the same on unbranded diesel from Rs 7.83 to Rs 9.83 per litre, a notification of the Central Board of Excise and Customs (CBEC) said.
The increase in excise duty will fetch the government over Rs 3,700 crore during the remaining period of the current fiscal.
This is the second hike in excise duty in less than two weeks as the government looks to make use of the slump in oil prices to shore up resources at a time when its divestment kitty is likely to fall way short of target.
The government had on January 2 hiked excise duty on petrol by Rs 0.37 per litre and by Rs 2 a litre on diesel to mop up a little less than Rs 4,400 crore (Rs 44 billion).
On December 17, 2015, it had raised excise duty on petrol by Rs 0.30 per litre and Rs 1.17 a litre on diesel to garner Rs 2,500 crore (Rs 25 billion).
Taken together with the November 7, 2015 increase in excise duty on petrol of Rs 1.60 per litre and diesel by 30 paise to raise Rs 3,200 crore
(Rs 32 billion), this is the fourth hike in levies this fiscal.
In the four increases, the government is expected to mop up over Rs 13,700 crore (Rs 137 billion) to meet its budgetary deficit.
Prior to these, the government had in four installments raised excise duty on petrol and diesel between November 2014 and January 2015 to lessen the reduction in retail rates, which followed falling international oil rates.
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 (Rs 200 billion) in additional revenue to the government, helping it meet its fiscal deficit target.
If the government would not have raised these duties, consumer price of petrol and diesel should have been lower by 10.77 a litre and Rs 11.80 per litre, respectively.
Petrol currently costs Rs 59.03 per litre in Delhi while diesel costs Rs 44.18 a litre.
After including additional and special excise duty, the total levy on unbranded petrol will be Rs 20.48 per litre, as against Rs 19.73 currently.
Similarly, on unbranded or normal diesel, total excise duty after including special excise will be Rs 15.66 per litre compared with the Rs 13.83 now.
The basic excise duty on branded petrol has been raised from Rs 8.91 per litre to Rs 9.66 and the same on branded diesel from Rs 10.19 to Rs 12.19 per litre, the CBEC notification said.
The government had collected Rs 99,184 crore (Rs 991.84 billion) in excise collections from the petroleum sector in 2014-15, which stood at Rs 33,042 crore (Rs 330.42 billion) in the first quarter of the current fiscal.