Budget 2018 hikes road cess by Rs 8, petrol to cost Rs 73/litre in Delhi

Even as the Union Budget 2018-19 proposed levy of road and infrastructure cess of Rs 8 per litre on petrol and diesel, while abolishing the additional excise duty of Rs 6, global prices pushed petrol to a nearly three-and-a-half-year high of Rs 73.05 per litre in Delhi on Thursday.

The basic excise duty on unbranded petrol was slashed by Rs 2 from Rs 6.48 per litre and on branded petrol from Rs 7.66 per litre.

Similarly on unbranded diesel, the additional excise duty was brought down from Rs 8.33 per litre to Rs 6.33 per litre and on branded diesel from Rs 10.69 per litre to Rs 8.69 per litre.

Union Finance Secretary Hasmukh Adia told a post-Budget media briefing that the changes won't affect the customer. Only the devolution of cess has been changed, he said.

The 5 per cent road and infrastructure cess on ethanol-blended petrol up to 10 per cent and bio-diesel up to 20 per cent has been abolished.

Road and infrastructure cess on petrol and diesel manufactured in and cleared from four specified refineries in the northeast has been levied at Rs 4 per litre.

Instead, governed by the dynamic daily pricing system, petrol prices reached landmark levels on Thursday in key metros Kolkata, Mumbai and Chennai at Rs 75.74, Rs 80.91, and Rs 75.77 per litre respectively.

The previous coresponding highs in these cities were Rs 76.14 (Kolkata, August 2014), Rs 81.75 (Mumbai, July 2014) and Rs 75.78 (Chennai, August 2014).

Asked about the cut in excise duty and imposition of road cess in the Budget, analysts said it was the global crude oil prices which were driving petrol and diesel rates.

"That depends on the crude oil price outlook. Crude oil prices have been increasing for the last six months after 2-3 years of lull. So, given that it is free pricing now, any projection on prices of petrol and diesel will be difficult," Raju Kumar, tax partner, EY, said.

"Finance Minister Arun Jaitley's populist measure of reducing basic excise duty on fuel comes at a time when petrol prices have hit Rs 80 across major cities in India. For the past few years, the excise on the commodity has always remained steep despite crude prices almost halving since early 2016," said Saurabh Bhagotra, Solicitor at Zaiwalla & Co.

Global and domestic factors have spiked the fuel prices. Production curbs by the Organisation of the Petroleum Exporting Countries and high demand have led to the surge. On Thursday, price of the Brent crude oil was around $69 per barrel.