Petroleum Minister Dharmendra Pradhan defends excise duty hike on petrol, diesel

Petroleum Minister Dharmendra Pradhan defended the hike in excise duty on petrol and diesel on Wednesday saying that the decision was taken to save money for developmental works after substantial benefits of reducing global crude prices were passed on to consumers by effecting price cuts.

"The benefits of lower crude prices were first passed on to consumers... We had to raise excise duty to save some money for the national exchequer to carry out development works," Pradhan said in Rajya Sabha.

Noting that the international crude prices came down to less than US $50 per barrel recently from US $111 per barrel during the Iraq crisis, Pradhan said that consumers have substantially gained as a result of the reduction in retail selling prices of petrol and diesel.

Petrol prices have come down from Rs 73.60 per litre in Delhi last July to stand at Rs 57.31 per litre now. At the same time, the retail selling price of diesel fell to Rs 46.62 per litre from Rs 58.97 a litre in August 2014. While the price of petrol and diesel in Delhi has been reduced by Rs 16.29 per litre and Rs 12.35 per litre respectively, the increase in excise duty on petrol and diesel is Rs 7.98 per litre and Rs 6.70 per litre only indicating that a major component of the benefit of reducing international crude prices have been passed on to the consumers, Pradhan added.

Replying to a supplementary, the minister said that one of the primary objectives behind the increase in excise duty was to fund the infrastructure development programme of the government, particularly for building roads.

"Allocation of these resources to road sector will also spur economic activity and employment generation arising out from the road construction," the minister said.

Replying to another question, Pradhan said that the difference in the price of petrol in Maharashtra and Delhi is mainly due to the fact that the western state levies local body tax.