COVID-19 lockdown financing: India raises excise duty on petrol by Rs 10, diesel by Rs 13 per litre; no change in retail sales prices

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Enamul Hafiz Latifee compiles,

The central government of India on Tuesday, 05 May 2020 evening raised the excise duty on petrol by Rs 10 and on diesel by Rs 13 per litre to recoup some of the loss of revenue suffered by the government due to the COVID-19 lockdown.

The change in duties will come into effect from 06 May, an official notification said.

The change in the tax structure will not impact the retail sale price of petrol and diesel on account of the excise duty hike.

 

A central government official said the revenue generated from these duties shall be used for infrastructure and other developmental items of expenditure.

A Rs 1 per litre increase in excise duty on petrol and diesel usually means an additional Rs 14,500 crore in annual revenue to the government. But the revenue will accrue only when demand for the fuel, curtailed due to the extended lockdown, rises substantially.

The Centre’s move comes a day after the Aam Aadmi Party government in Delhi increased value-added tax (VAT) on petrol and diesel to raise money to fight the coronavirus disease. This decision had increased the price of petrol by Rs 1.67 per litre to Rs 71.26 and diesel, by Rs 7.10 to Rs 69.39.

That decision was sharply criticised by the Bharatiya Janata Party and the Congress in Delhi. Outside of politics, there has been some recognition that this might be the only way for governments that are running out of money to pay employees salaries.

 

By evening, according to news agency ANI, Congress-ruled Punjab decided to hike the price of petrol and diesel by Rs 2 per litre. Telangana’s K Chandrasekhar Rao, on the other hand, announced the decision to raise the price of liquor by 16 percent.

A few hours later, came the Union Finance Ministry order.

This is the second time since March that the Centre raised duty on petrol and diesel.

 

On 14 March, the Centre had raised duties on petrol and diesel to Rs 3 per litre. That hike had raised the total central levies on petrol to Rs 22.98 per litre and on diesel to Rs 18.83 per litre. The retail price of the fuel had, however, remained unchanged because of the decline in crude prices.

Since 16 March, oil companies have abandoned the practice of daily revision of the two fuel rates, making up for present and potential inventory losses.

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