Despite a wider excise duty difference between petrol and diesel, the group of ministers on fuel pricing led by finance minister Pranab Mukherjee has ruled out imposing any additional excise duty on diesel cars, which was proposed last year in a report by former Planning Commission member Kirit Parikh that formed the basis for sweeping oil price revisions last year.

After the government reduced the excise duty on diesel to R2.60 from R4.60 a litre last Friday, the excise revenue from petrol is higher than that from diesel by R70,477 crore. The difference in revenue was earlier about R59,000 crore.

Petrol, which attracts R14.35 a litre excise duty, is witnessing a jump in consumption at more than 10% a year, while consumption of diesel, which now bears R2.60 a litre excise duty, is growing at about 6%.

The Parekh committee had suggested that diesel car owners should pay more excise duty on their fuel to bring their duty liability at par with petrol car owners, without affecting other diesel users like farmers, truckers and those in the transportation business, who pass on their fuel cost to the final consumers and impact inflation. Slapping higher excise duty on diesel cars would have ensured this.

Now cars bear different rates of excise duty?10% for small cars and 22% for big ones.

Petroleum secretary G C Chaturvedi told FE that the ministerial group has not favoured imposing a higher excise duty on diesel cars as recommended by the Parikh committee. After announcing a 5% cut in customs duty on crude oil and on finished products, a Rs 2 cut in excise duty on diesel and price revisions in LPG, kerosene and diesel, Oil minister S Jaipal Reddy said last Friday that fuel retailers are still estimated to incur R1,20,000 crore losses on account of selling fuel below cost. The minister said that various options would be explored to address this. Upstream companies like ONGC, Oil India and Gail India would meet roughly a third of this, but the rest has to be met by the government, retailers like IOC, HPCL and BPCL and the consumer.

Sources said the government will expedite the implementation of direct transfer of cash subsidy to poor customers, which would reduce diversion of fuel and save subsidy outgo. IOC is already doing a pilot study on this in Hyderabad, IOC chairman R S Butola said.

It is conservatively estimated that the government now loses about R13,000 crore every year due to the illegal diversion of subsidised kerosene to adulterate costlier diesel. About a third of the total 11 million tonnes (about 471 crore litres) of subsidised kerosene that the union government gives to states through state owned retailers is reportedly diverted for diesel adulteration. Also, a large number of subsidised LPG cylinders are diverted for commercial use, for example, in hotels.

In the meantime, Pranab Mukherjee has urged state governments to cut levies on diesel, kerosene and domestic LPG in line with the duty cuts undertaken by the central government to give some relief to the common man. In a letter to chief ministers of states, Mukherjee said that in raising the retail prices of diesel, LPG, and kerosene, the government has been conscious of its burden on the common man, and therefore, the price hike has been ?minimal?.

?Even though the central government has been under compulsion to maintain its fiscal and budgetary resource management targets and find additional resources to finance various welfare schemes, it has sacrificed its revenues from the oil sector on account of customs and excise duty in order to minimize the impact on the common man,? a government release said on Monday, quoting Mukherjee.