In less than an hour of the Government increasing excise duty on petrol and diesel to take advantage of the falling crude oil prices, public sector oil retailers reduced retail prices by ₹2 a litre from midnight on Friday/Saturday.
The Government has increased the excise duty on the two auto fuels by ₹2 a litre. The price cut and duty hike will erode the higher profit IndianOil, Hindustan Petroleum and Bharat Petroleum have earned on petrol and diesel from the softening of crude prices.
The price at which Indian refiners buy crude oil fell to $45.33 a barrel on January 15 from $60.10 a barrel on December 15.
This is the fourth hike since November, and the Government expects to get ₹20,000 crore in the current fiscal year. Every litre of non-branded petrol will now attract excise duty of ₹8.95, while for branded petrol it will be ₹10.10 a litre.
For non-branded and branded diesel, the new duty will be ₹7.96 and ₹10.25 a litre.
The oil marketing companies have cut the price of diesel by ₹2.25 a litre and of petrol by ₹2.42 a litre. At the retail end, non-branded petrol in Delhi will cost ₹58.91 a litre, and diesel, ₹48.26 a litre. This is the third cut in three months.
Due to the fall in crude oil prices, the companies were earning a profit of ₹7.61 a litre on petrol in the fortnight that ended on January 14, and ₹5.50 a litre on diesel. Now, the profit is likely to be ₹3.19 a litre on petrol and ₹1.25 on diesel.
Technically speaking, a revision in excise duty is a pass-through. However, on all the three previous occasions of duty hikes, oil marketing companies did not pass the revision on to the consumers.
State levy The hike in Central Excise Duty is good news for State Governments, as the Centre levies excise duty at a specific rate while States levy VAT/sales tax ad valorem (at a certain percentage of the value). Now, the base for levying VAT/Sales Tax includes the Central Excise Duty. The hike in excise will up the base and so States will benefit.
Truck rentals are expected to get cheaper by 3 per cent with the drop in fuel prices, says the Indian Foundation of Transport Research and Training, a body that tracks the transport sector.