The government has increased excise duty on petrol and diesel by Rs 1.50 a litre but retail prices will not go up as oil companies offset the hike against an expected reduction on account of falling global oil rates.
The duty hike, which was notified late last evening, will boost government revenue by about Rs 13,000 crore on an annual basis and help contain budget deficit.
Indian Oil Corp (IOC), the nation’s largest fuel retailer, said the excise duty hike will not be passed on to consumers and will be adjusted against reduction in rates that was likely by this weekend.
The fall in international oil prices had resulted in six consecutive reduction in petrol prices since August and two in diesel in the last one month. There was a possibility of another round of cut this weekend.
Excise duty on normal or unbranded petrol was hiked from Rs 1.20 per litre to Rs 2.70 per litre and unbranded diesel from Rs 1.46 a litre to Rs 2.96, a government notification said.
The same on branded petrol was raised from Rs 2.35 a litre to Rs 3.85 and on branded diesel from Rs 3.75 to Rs 5.25 per litre.
“For the moment, we are not passing on the increase in excise duty. It is being absorbed by companies and will be adjusted against review in rates which was due on Saturday,” IOC Chairman B Ashok said.
Revision in rates will be considered at the next fortnight (end of November), he said. “As and when we look at price revision, whenever it is due, we will look at the situation and decide on revising rates then.”
Before the duty hike, petrol cost Rs 64.25 a litre in Delhi and diesel Rs 53.35 a litre. They will continue to be priced at the same rate.
“There is no increase in retail prices,” he said.
While the fall in global rates and the resultant cuts in retail prices have led to loss of revenue to the exchequer, particularly of state governments, there wasn’t any loss to the central government on account of reduction in petrol and diesel prices as excise duty on the two fuel is fixed and not ad valorem.
Unbranded petrol at present attracts a basic excise duty of Rs 1.20 per litre, a special additional excise duty of Rs 6 a litre and a road cess of Rs 2 per litre.
Unbranded diesel attracts a basis excise duty of Rs 1.46 a litre and road cess of Rs 2 per litre.
The total excise duty on unbranded petrol will rise from Rs 9.20 to Rs 10.70 per litre and that on unbranded diesel from Rs 3.46 to Rs 4.96 per litre.
Branded petrol attracts an excise duty of Rs 10.35 per litre which would go up to Rs 11.85 per litre and excise duty on branded diesel will go up from Rs 5.75 to Rs 7.25 a litre.
State-owned fuel retailers Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL), following the fortnightly review practice, were due to revise retail rates of petrol and diesel on Saturday.
Going by the trend in international market, retail rates should come down.
Petrol price was last cut by Rs 2.41 a litre on November 1. On the same day, diesel rates were reduced by Rs 2.25 per litre.
Petrol price has been cumulatively cut by Rs 9.36 per litre since August.
Diesel price was cut for the first time in more than five years on October 19 by Rs 3.37 a litre when the government decided to deregulate the fuel. This was followed by another reduction on November 1.
Sources said oil firms revise rates of petrol, which was deregulated in June 2010, and diesel on 1st and 16th of every month based on average international oil price and rupee-US dollar exchange rate.
Brent crude fell to a four-year low of USD 79.86 per barrel amid signs that OPEC remains unwilling to reduce output to ease concern of a global supply glut.
Brent has lost almost 30 per cent since its June peak amid speculation that global supply is outpacing demand.