Excise duty hike on fuel to meet fiscal deficit

The government on Wednesday increased excise duty on petrol by Rs 0.30 per litre and by Rs 1.17 a litre on diesel to make use of slump in oil prices to garner an additional Rs 2,500 crore. Basic excise duty on unbranded petrol has been increased from Rs 7.06 per litre to Rs 7.36 and the same on un-branded diesel from Rs 4.66 to Rs 5.83 per litre. 

In anticipation of the hike, oil companies had on Tuesday announced decrease in petrol price by just 50 paise a litre and by 46 paise on diesel even though oil rates slumping to multi-year low war-ranted a bigger cut. 

This is the second increase in excise duty in less than six weeks. The government had on November 7 raised excise duty on petrol by Rs 1.60 per litre and on diesel by 30 paise a litre. Through the previous excise duty hike, the government had mopped up Rs 3,200 crore.

Congress leader Anand Sharma said the government saved USD 88 billion on account of fall in global crude oil prices. The benefits, he said, were not being transferred to consumers and alleged that the government was “profiteering” from the sharp drop in crude prices and trying to cover up for its “fiscal mismanagement”.

However, justifying the hike, Finance Minister Arun Jaitley said for the first time fiscal deficit target will be met without budgetary cuts. He said the earlier governments used to achieve fiscal deficit targets by resorting to expenditure cuts, adding that during the previous UPA rule, the cut was as high as Rs 1.20 lakh crore and “this is a harsh reality.”