Government on Saturday hiked excise duty on petrol by Rs 0.37 per litre and by Rs 2 a litre on diesel, the second increase in duties in just over two weeks, to mop up a little less than Rs 4,400 crore.
However, there will be no increase in retail selling price of petrol and diesel as state-owned oil firms had not passed on the full benefit of a reduction in international oil prices to consumers on January 1.
Basic excise duty on unbranded or normal petrol has been increased from Rs 7.36 per litre to Rs 7.73 and the same on unbranded diesel from Rs 5.83 to Rs 7.83 per litre, a notification of the Central Board of Excise and Customs (CBEC) said.
The increase in excise duty will fetch the government over Rs 4,300 crore on diesel and about Rs 80 crore on petrol.
This is the second time in less than three weeks that excise duty is being hiked to make use of the slump in oil prices to garner resources for the government without burdening consumers.
The government had from December 17 raised excise duty on petrol by Rs 0.30 per litre and Rs 1.17 a litre on diesel to garner Rs 2,500 crore.
Taken together with the November 7, 2015 increase in excise duty on petrol of Rs 1.60 per litre and diesel by 30 paise to raise Rs 3,200 crore, this is the third hike in levies this fiscal.
In the three increases, the government is expected to mop up over Rs 10,000 crore to meet its budgetary deficit.
Prior to these, the government had in four installments raised excise duty on petrol and diesel between November 2014 and January 2015 to lessen the reduction in retail rates, which followed falling international oil rates.
The four excise duty hikes during this period totalled Rs 7.75 per litre on petrol and Rs 6.50 a litre on diesel. It led to about Rs 20,000 crore in additional revenue to the government, helping it meet its fiscal deficit target.
If the government would not have raised these duties, consumer price of petrol and diesel should have been lower by 10.02 a litre and Rs 9.97 per litre respectively.
Petrol currently cost Rs 59.35 per litre in Delhi while diesel costs Rs 45.03 a litre.
"The increase in excise duty on petrol by 37 paise and in diesel by Rs 2 per litre will not result in any increase in the current price," Revenue Secretary Hasmukh Adhia tweeted.
Anticipating an excise duty hike, state-owned oil firms had on January 1 cut petrol price by 63 paise per litre and diesel by Rs 1.06 a litre, much less than what was warranted because of the slide in international rates. He said the duty hike would result in "additional resource mobilisation" of over Rs 4,300 crore in the remaining part of the year.
After including additional and special excise duty, the total levy on unbranded petrol will be Rs 19.73 per litre, as against Rs 19.36 currently.
Similarly, on unbranded or normal diesel, total excise duty after including special excise will be Rs 13.83 per litre compared with the Rs 11.83 now.
The basic excise duty on branded petrol has been raised from Rs 8.54 per litre to Rs 8.91 and the same on branded diesel from Rs 8.19 to Rs 10.19 per litre, the CBEC notification said.
The government had collected Rs 99,184 crore in excise collections from the petroleum sector in 2014-15, which stood at Rs 33,042 crore in the first quarter of the current fiscal.