As fuel prices continue to hit new highs, the government is considering a cut in excise duty and the ministry of petroleum and natural gas has already written to the finance ministry, suggesting a cut in the duty.
“When global crude oil prices were low, excise duty was increased. Now, the government is considering a cut,” a source told Moneycontrol.
Also Read: Excise duty collection jumps 48% this fiscal on record hike in taxes on petrol, diesel
The prices of petrol and diesel touched a record high of Rs 85.45 a litre and Rs 75.63 a litre, respectively, in Delhi on January 22. In Mumbai too, fuel rates increased to a new record high of Rs 92.04 a litre on petrol and Rs 82.40 a litre on diesel.
But, why are petrol and diesel prices on the rise?
The price of Brent crude had crashed from $66 per barrel in early 2020 to $19 per barrel in April mainly because of lockdown in various countries and travel restrictions that resulted in lower crude and fuel demand. From that record low, Brent crude prices touched $55.37 a barrel at one point on January 22, 2021.
Also Read: Fuel prices touch record high in Delhi, Mumbai
The government had raised excise duty in March when crude oil prices were down. The excise duty on petrol was raised to Rs 32.98 per litre from Rs 19.98 and diesel to Rs 31.83 per litre from Rs 15.83. Every Re 1 a litre increase in excise duty adds approximately Rs 14,500 crore to the government’s kitty.
When the economy was at a standstill due to lockdown, several state governments too had increased duties to boost their revenue. At present, taxes contribute 62 percent of the prices of petrol and 57 percent on diesel in Delhi. It is the higher taxes, along with rising global crude oil prices that led to the current spike in petrol and diesel prices in India.
Also Read: Fuel-o-nomics: Check out the costs and taxes that add up to your fuel bill
Fuel prices had hit their previous highs in October 2018 when crude oil prices had touched nearly $80 a barrel.
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