Update: Govt hikes excise duty on petrol, diesel by Rs 2 per litre

The government on Friday hiked excise duty on petrol and diesel by Rs 2 per litre each to take away gains coming by way of global oil prices slumping to six-year lows.

Retail pump rates will remain unchanged as the increase in excise duty neutralises the cut in petrol and diesel prices warranted from crude oil price slumping to about US $46 per barrel.

This is the fourth increase in excise duty on the fuels since November and cumulatively customers have been denied the benefit of Rs 7.75 per litre reduction in petrol and Rs 6.50 a litre cut in diesel rates that was warranted due to the slump.

A Finance Ministry notification said excise duty on unbranded petrol is being hiked to Rs 8.95 per litre and that on unbranded diesel to Rs 7.96 per litre.

The four excise duty hikes will garner about Rs 20,000 crore in additional revenues in the current financial year and will help the government meet its fiscal deficit target of 4.1 per cent of the gross domestic product (GDP).

Earlier in the day on Friday, Petroleum Minister Dharmendra Pradhan responded to criticism of oil firms not cutting rates of the fuel despite a near 4-per cent fall in global oil prices since January 1 saying, the pricing was not in the government's hands as the two fuels have been deregulated.

The Finance Ministry notification said the excise duty hike will be effective from January 16 midnight.

The government had last raised excise duty on petrol and diesel by Rs 2 per litre each from January 2. Prior to that, the tax was hiked by Rs 1.50 a litre each from November 12 and Rs 2.25 per litre on petrol and Re 1 on diesel from December 2..

Global crude oil prices have fallen almost 50 per cent since June 2014, the most since the 2008 financial crisis, as supplies swelled.

In April-September, IOC, Bharat Petroleum Corp (BPCL) and Hindustan Petroleum Corp (HPCL) had an inventory loss of Rs 5,300 crore which has risen by two to three times since then, an official said.

Petrol and diesel prices were last cut on December 16 by Rs 2 per litre each. This was the eighth straight reduction in petrol prices since August and fourth in diesel since October.

Petrol in the national capital as on January 16 costs Rs 61.33 a litre, the lowest in 44 months. Diesel costs Rs 50.51 a litre, the lowest since July 2013.

Since August, petrol price have been cut by Rs 12.27 per litre on a cumulative basis while diesel rates in four downward revisions have been slashed by a total of Rs 8.46 a litre. Crude oil price in June was at US $115 per barrel.