The central government has cut the excise duty on petrol and diesel on Diwali-eve by Rs 5 and Rs 10, respectively, after prices of both the key transportation fuels rose to a record this year.
The new prices will be effective from Nov. 4, the government said in a statement on Wednesday.
Prices of petrol and diesel have been increased 77 times so far this year. Between Jan. 1 and Nov. 3, petrol price has gone up by Rs 26.33 a litre whereas diesel costs Rs 24.55 more. A litre of the two fuels cost Rs 110.04 and Rs 98.42 in Delhi, according to Bloomberg data.
“The reduction in excise duty on diesel will be double that of petrol and will come as a boost to the farmers during the upcoming rabi season," the government statement said. “The reduction in excise duty on petrol and diesel will also boost consumption and keep inflation low, thus helping the poor and middle classes."
Central and state government taxes constitute the maximum chunk of the fuels' price charged to consumers. The central and state taxes as a percentage of the base price stood at 123.1% for petrol and 93.5% for diesel, according to data available on the Indian Oil Corp.'s website on Nov. 1. Following the excise duty cut, this will come down to 112.5% for petrol and 73.3% for diesel.
The government charges an excise duty of Rs 31.8 a litre on diesel and Rs 32.9 per litre on petrol, based on breakup data available for Nov. 1. Excise duty as a percentage of retail price will fall from 32.3% to 22.1% for diesel after the excise duty cut. For petrol, that will reduce from 30% to 25.4%.
Higher fuel taxes helped boost central excise duty collections that jumped 33% year-on-year to Rs 1.72 lakh crore during April-September.
Global crude oil prices gained 58.7% in 2021 supported by vaccination-led demand revival, weak supplies and increased energy demand from China. Prices retreated from a multi-year high of $86.4 per barrel on Oct. 26 amid speculations of increased supply from the Organisation of Petroleum Exporting Countries.
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