Petrol and Diesel Excise Duty Cut on Diwali Eve

· Rs. 5 and Rs. 10 from 4 Nov

· States Urged to Cut VAT on Petrol & Diesel to give Relief to Consumers

Government of India has taken a significant decision of reducing Central Excise Duty on Petrol & Diesel by Rs. 5 and Rs. 10 respectively from 4 Nov 2021. Prices of petrol & diesel will thus come down accordingly.

The reduction in excise duty on diesel will be double that of petrol. The Indian farmers have, through their hard work, kept the economic growth momentum going even during the lockdown phase and the massive reduction in excise on diesel will come as a boost to the farmers during the upcoming Rabi season.

In recent months, crude oil prices have witnessed a global upsurge. Consequently, domestic prices of petrol and diesel had increased in recent weeks exerting inflationary pressure. The world has also seen shortages and increased prices of all forms of energy.

The Indian economy has witnessed a remarkable turnaround post the COVID-19 induced slowdown. All sectors of the economy – be it manufacturing, services or agriculture – are experiencing significant upward economic activity.

The Centre's move follows calls for a cut in fuel taxes in view of rising prices feeding into inflation and the wider impact on growth.

Government revenues have jumped on the back of a recovery. Economists expect them to exceed the budgeted estimate by about Rs 2 lakh crore. As per the latest estimates, tax revenues touched about 60% of the budget estimate of Rs 15.45 lakh crore in the April-September period.

The latest move is likely to cost the exchequer about Rs 55,000 crore for the remaining five months of FY22, a government source said.

Before the reduction, a consumer in Delhi paid Rs 58.21 in taxes on a litre of petrol, including excise of Rs 32.90 and state VAT of Rs 25.31. Diesel users paid a tax of Rs 46.17 per litre, including Rs 31.8 of excise.

The central government had raised duties on petrol and diesel by Rs 13-16 per litre in March-May last year after crude oil prices collapsed in the international market. But after oil prices started recovering in the international market, domestic fuel rates climbed to record highs.

Oil prices have rallied by a quarter in the last two months to $83 a barrel as demand has returned at a faster-than-expected pace while supply has been slow to respond. OPEC+, a group of nearly two dozen oil-producing countries led by Saudi Arabia and Russia, has kept supplies artificially curbed, boosting prices.

The Indian Foundation of Transport Research and Training said that the Rs 10 per litre cut in excise on diesel should lower truck rentals by at least 10-12 % in the next few days. The Rs 7.55 per litre hike in diesel price in October had resulted in a jump in freight rates for full truck loads by 12% on most trunk routes.

However, the government said that the Indian economy has witnessed a remarkable turnaround since the Covid-led slowdown. "All sectors of the economy - be it manufacturing, services or agriculture - are experiencing significant upward economic activity," it said.