With sale of branded or premium petrol and diesel falling to almost nil due to high duties, a government appointed expert panel has recommended slashing excise duty to make them at par with regular fuel.
At present, the Finance Ministry levies Rs 15.50 per litre excise duty on branded or premium petrol as compared to Rs 9.20 a litre on regular or unbranded fuel. Similarly, branded diesel attracts Rs 5.75 a litre excise duty as opposed to Rs 3.46 a litre for fuel without a brand name.
As a result, branded petrol costs Rs 80.99 a litre in Delhi while regular petrol is priced at Rs 71.46. Similarly, premium diesel costs Rs 63.71 per litre while unbranded diesel is priced at Rs 57.28.
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The Saumitra Chaudhuri Committee on Auto Fuel Vision & Policy 2025 said the differential duty rate would not fulfill the narrow revenue objectives as branded fuel sales have fallen sharply.
"The 'branded' products are premium automotive fuels that result in improved engine life and better long term mileage and policy should encourage their use, not discourage it," the panel said in its report submitted to the Oil Ministry in Delhi.
Stating that the same product for the same application is being charged widely different rates of excise duty, it said the differential duty structure introduced in 2008 has discourage use of branded fuel.
"It is urged that the Department of Revenue make immediate changes in this situation and bring the duty rates of gasoline (petrol) and diesel on par, irrespective of whether they are regular or premium, i.e. branded," it said.
The rates of excise duty on gasoline and diesel are fixed rates, not ad valorem.
"The argument can be made that a higher priced product - which premium fuels indeed are - should be taxed at a higher rate.
"This legitimate concern can be taken care of by imposing a small differential in the excise duty of 50 paise per litre, which will more or less maintain the inter se tax proportionality as between regular and premium automotive fuels, as long as the duty rates remain fixed and do not change to ad valorem," the report said.
The panel also said in its report that state VAT on natural gas/CNG varies widely and is in many cases as high as 15 per cent ad valorem. The VAT on LPG other than that for domestic use is also variable and high.
It recommended a moderate rate of state VAT (or GST as and when it rolls out) should be imposed, which will encourage the use of this environmentally cleaner fuel.
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