Facing severe criticism, the government has slashed the excise duty
by Rs 2 per litre, which is expected to bring down the retail selling prices of the two fuels.According to the government, the decision to reduce the "Basic Excise Duty" rate on petrol
has been taken to cushion the impact of rise in international crude prices.
As per the Ministry of Petroleum and Natural Gas's calculations, the reduction in excise duty
will decrease prices of petrol
by Rs 2.50 and Rs 2.25 per litre respectively in New Delhi.
Currently, an excise duty
component of Rs 21.48 per litre is levied upon petrol
-- and, consequent to the reduction in excise duty, this will come down to Rs 19.48.In case of diesel, Rs 17.33 excise is charged per litre -- this will come down to Rs 15.33 per litre.
On Tuesday, the retail selling price of petrol in New Delhi was pegged at Rs 70.88, while that for diesel was at Rs 59.14 per litre.In effect, the government decision will act as a check against retail prices going up in case global crude rates rise further.
Interestingly, since the implementation of daily pricing on June 16 this year, the price of the Indian basket of crude oil has gone up by around 19 per cent from $46 a barrel to $55.36 a barrel. However, domestic retail selling prices of petrol
in Delhi have gone up by only 8 per cent during this period.
"We see a decline in crude oil prices
now. Hence, there will be a balancing of fuel prices in the coming weeks. The positive global changes include an increase in rig utilisation and also a rise in production from Libya and Algeria, which will increase supply,” said Dhaval Joshi, an analyst with Emkay Global Financial Services.
According to Petroleum Minister DharmendraPradhan, the main reason for the increase in petroleum product prices is the increase in international prices due to hurricanes Harvey and Irma in the US, following which 13 per cent of the US refinery capacity was shut down. “In the past three months, the FOB price of petrol
in the international market increased by 20 per cent. The recent rise in prices is transient in nature and will ease in the coming days,” said a source close to the development.
Opposition parties have been critical of the government that petrol
prices have been ruling high and it has not cut excise on fuels despite international prices rising recently.
When crude prices were falling dramatically over the last two years, the government, since 2015, hiked excise on petrol
by Rs 12 a litre, and on diesel
by over Rs 13, in instalments.
Last month, petrol
prices in Mumbai, for instance, crossed levels it had touched before the Narendra Modi government took charge in 2014. In response to criticism on rising fuel prices, Petroleum Minister Dharmendra Pradhan clarified that the excise revenues served for spending on social development schemes.
He also ruled out any change in the present system of market-determined pricing.