The government has decided to give itself a gift at the beginning of the New Year itself. For the second time in as many weeks, the excise duty on motor fuels has been hiked. Thus, the excise duty levied on petrol went up by INR 0.37 per litre, while it was INR 2 for per litre of diesel.
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With this move, the government expects to mop up an additional INR 4,400 crores. The last excise duty hike had come on 17th December, with the breakup being, INR 0.30 for per litre of petrol and INR 1.17 per litre of diesel. This had resulted in a swelling of the coffers by over INR 2,500 crores.

In this fiscal alone, the government, through such periodic excise duty hikes has raised a total of INR 10,000 crores. The funds raised are to be used to pare the budgetary deficit.
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On the flip side, consumers are said to be angry over the fact that the government has been raising the duty component at a time when pump prices should be falling.
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Estimates put the retail price reduction somewhere in the region of INR 10 per litre of diesel and petrol. The latest duty hike however, hasn’t reflected in the rates levied at petrol pumps. Crude prices have fallen considerably, thereby resulting in a windfall of sorts for the oil companies. Now, with the higher excise duty rate, the companies are absorbing this cost without passing them on to retail consumers.

This game of financial chess may be beneficial for the government in meeting its fiscal targets, but it is indeed a tad confusing for the end users. While the oil companies have raised prices citing high crude costs, when the prices dropped for the latter, retail pump prices have failed to reflect the same. It will be interesting to see the next move from the government in a scenario where global oil prices continue to plummet following an oil glut.



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