The government on Friday announced a rise of Rs 2 a litre each in the excise duties on petrol and diesel. Even so, oil marketing companies (OMCs) cut the prices of the two fuels by a little over Rs 2 a litre, effective midnight on Friday.
The rise in the excise duties, the fourth by the Centre in two months, will give the exchequer another Rs 5,000 crore in the rest of this financial year (ending March 31). Through the rises, the government will collect a total of Rs 20,000 crore. Of this, the mop-up through the previous rise, Rs 6,000-7,000 crore, will go towards infrastructure. The rest will help the government narrow its fiscal deficit to the targeted 4.1 per cent of gross domestic product in 2014-15. The target, however, seems difficult due to subdued indirect tax collections and disinvestment proceeds.
This is the ninth straight reduction in petrol prices since August and the fifth in diesel since October.
In Delhi, petrol will cost Rs 58.91 a litre, the lowest in 44 months, compared with the current Rs 61.33 a litre. Diesel will cost Rs 48.26 a litre in Delhi, the lowest since April 2013, against Rs 50.51 currently.
Both prices were previously cut on December 16, also by Rs 2 a litre each. Including Friday’s reduction, petrol has been cut by Rs 14.69 a litre since August, while diesel rates have been cut by a total of Rs 10.71 a litre
“There aren’t many avenues left for the government to increase revenue. The depressed global oil prices have given an opportunity. Such measures, even if small, will help in achieving the fiscal deficit target,” said D K Doshi, chief economist, CRISIL.
The Centre’s fiscal deficit had touched almost 99 per cent of the full-year Budget target in the first eight months of this financial year.
A finance ministry notification said the excise duty on unbranded petrol was being raised to Rs 8.95 a litre, while that on unbranded diesel would rise to Rs 7.96 a litre. Branded petrol will draw a duty of Rs 10.10 a litre and branded diesel Rs 10.25 a litre.
Earlier, the government had raised these duties on by Rs 2 a litre each from January 2. Prior to that, the tax was raised by Rs 1.5 a litre each from November 12 and Rs 2.25 a litre on petrol and Rs 1 on diesel from December 2.
The first two excise duty rises are likely to bring additional indirect tax revenue of about Rs 10,000 crore in the remainder of this financial year. The two increases in January could bring in an additional Rs 6,000 crore. The latest rise will give another Rs 5,000 crore to the government.
In annualised terms, the proceeds from the latest round will give the government about Rs 24,000 crore, while the first two increases will give it Rs 30,000 crore. The January 2 move would yield Rs 24,000 crore. In all, the government will get Rs 78,000 crore a year.
Global crude oil prices have fallen about 50 per cent since June 2014, the most since the 2008 financial crisis.