Centre reduces excise duty on petrol by Rs 8 and on diesel by Rs 6/litre

The move will have revenue implication of around Rs 1 trn for the govt, says FM Sitharaman; also, the govt will give Rs 200/cylinder subsidy to Ujjwala Yojana beneficiaries for 12 cylinders in a year

Finance Minister Nirmala Sitharaman on Saturday said Centre has decided to reduce excise duty on petrol by Rs 8 per litre and on diesel by Rs 6 per litre to avoid increase in fuel prices that were necessitated due to surge in international oil prices. The move will have revenue implication of around Rs 1 trillion for the government, she said.

"We are reducing the Central excise duty on Petrol by Rs 8 per litre and on Diesel by Rs 6 per litre. This will reduce the price of petrol by Rs 9.5 per litre and of Diesel by Rs 7 per litre," tweeted Sitharaman in a thread on the bevy of measures being taken to reduce the impact of price rise on common man.

"I wish to exhort all state governments, especially the states where reduction wasn’t done during the last round (November 2021), to also implement a similar cut and give relief to the common man," said Sitharaman.

PM Narendra Modi has specifically asked all arms of the government to work with sensitivity and give relief to the common man. Keeping in line with PM Modi's commitment to help the poor and common man, we are announcing more steps to help our people, she said.

Sitharaman also said that Centre will give a subsidy of Rs 200 per gas cylinder (upto 12 cylinders) to over 90 million beneficiaries of Pradhan Mantri Ujjwala Yojana. This will have a revenue implication of around Rs 6,100 crore a year.

Further, the government is also reducing the customs duty on raw materials and intermediaries for plastic products where the country's import dependence is high. It will result in reduction of cost of final products, she added.

"We are also reducing the customs duty on raw materials  intermediaries for plastic products where our import dependence is high. This will result in reduction of cost of final products. Similarly, we are calibrating customs duty on raw materials and intermediaries for iron and steel to reduce their prices. Import duty on some raw materials of steel will be reduced. Export duty on some steel products will be levied. Measures are being taken up to improve the availability of cement and through better logistics to reduce the cost of cement," Sitharaman further said. 

"Today, the world is passing through difficult times. Even as the world is recovering from Covid-19 pandemic, the Ukraine conflict has brought in supply chain problems and shortages of various goods. This is resulting in inflation & economic distress in a lot of countries," Sitharaman in a series of tweets.

Sitharaman went on say that despite the challenging international situation, the government has ensured that there are no shortages or scarcity of essential goods. Even a few developed countries couldn't escape some shortages or disruptions, she added.

The government is committed to ensuring that prices of essential items are kept under control, she said. "Today’s decisions, especially the one relating to a significant drop in petrol and diesel prices will positively impact various sectors, provide relief to our citizens and further ‘Ease of Living.’ Ujjwala Yojana has helped crores of Indians, especially women. Today’s decision on Ujjwala subsidy will greatly ease family budgets," tweeted PM Modi on Sitharaman's announcements.

Post November 2021 reduction in excise duty on petrol by Rs 5 per litre and that on diesel by Rs 10 a litre, 25 states and UTs had cut VAT to give further reprieve to consumers battered by record-high retail prices. However, states ruled by non-NDA parties like Maharashtra, Andhra Pradesh, West Bengal, Kerala and Tamil Nadu had not reduced VAT.

Post that reduction, state-owned oil firms held petrol and diesel prices for a record 137-day period during which international oil prices rose from USD 84 per barrel to near 14-year high of USD 140. They finally broke the hiatus with a Rs 10 per litre increase on both petrol and diesel in 16 days starting March 22 but again hit a freeze button after the last revision on April 6 despite not covering all of the cost.

Holding of prices despite rise in cost had led to lower earnings of fuel retailers in the January-March quarter.

Welcoming the move, Oil Minister Hardeep Singh Puri said, "I want to highlight the fact despite this 2nd reduction in central excise, price of petrol & diesel in states like Maharashtra, Rajasthan, West Bengal, Tamil Nadu, Andhra Pradesh, Jharkhand & Kerala remain around Rs 10-15 higher than in BJP-ruled states." Rates differ from state to state depending on incidence of local taxes such as VAT. Andhra Pradesh has the highest VAT on petrol and diesel in the country, followed by Rajasthan and BJP-ruled Madhya Pradesh.

"This (high prices in non-BJP ruled states) is due to the refusal of their respective state governments to reduce VAT. It is time for these states to wake up & reduce VAT to provide relief to their consumers," Puri said.

The Congress government in Rajasthan had cut VAT following the November 2021 decision. Punjab, which ruled by the party, had seen the biggest reduction then due to a cut in VAT rates.

"Even during the pandemic, our government set a paradigm of welfare, especially with PM Garib Kalyan Anna Yojana. This is now acknowledged and appreciated the world over," Sitharaman said, referring to a scheme to provide free foodgrains to poor to help them tide over difficulties caused by a nationwide pandemic related lockdown.

"Despite the challenging international situation, we've ensured that there are no shortages/scarcity of essential goods. Even a few developed countries couldn't escape some shortages/disruptions. We are committed to ensure that prices of essential items are kept under control," she said.

The Finance Minister said despite rising fertilizer prices globally, the government has protected farmers from such price hikes.

"In addition to the fertilizer subsidy of Rs 1.05 lakh crore in the budget (for current fiscal), an additional amount of Rs 1.10 lakh crore is being provided to further cushion our farmers."

Central excise duty makes up for 26 per cent of petrol and diesel price now. After considering local sales tax or VAT, the total tax incidence in the price is as high as 42 per cent.

The excise tax on petrol was Rs 9.48 per litre when the Modi government took office in 2014 and that on diesel was Rs 3.56 a litre.

The government had between November 2014 and January 2016 raised excise duty on petrol and diesel on nine occasions to take away gains arising from plummeting global oil prices.

In all, duty on petrol rate was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months that helped government's excise mop up more than double to Rs 2,42,000 crore in 2016-17 from Rs 99,000 crore in 2014-15.

It cut excise duty by Rs 2 in October 2017 and by Rs 1.50 a year later. But it raised excise duty by Rs 2 per litre in July 2019.

It again raised excise duty on March 14, 2020 by Rs 3 per litre each. The government on May 6, 2020, again raised excise duties by Rs 10 per litre on petrol and Rs 13 per litre on diesel.

With inputs from PTI