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Economy

Petrol and Diesel Prices Cut By Rs. 2+, Excise Duties Also Hiked Similarly

Petrol prices are down by Rs. 2.42 per litre and diesel by Rs. 2.25 per litre from midnight today. And at the same time, in a notification, excise duties of petrol and diesel have been hiked.

  • Excise on Petrol is up to Rs. 10.10 per litre from Rs. 8.95. (Up by Rs. 1.15)
  • Excise on  Diesel is up to Rs. 10.25 per litre from Rs. 7.96. (Up by Rs. 2.29!)

Excise duties have been hiked so that the government can earn more revenue. Each Rupee hike is an extra Rs. 1,000 cr. that the government earns (we use 1000 cr. liters of the fuels, added together, per month).

This will bring petrol prices down to Rs. 58.91 and Diesel to Rs. 48.26 in Delhi.

Excise for petrol hasn’t been hiked that much, really. In 2012, the excise duty was Rs. 6.35 which was brought down when oil prices went up.

Diesel, however saw excise duties of only Rs. 3.75 per litre, which is up to Rs. 10.25 now.

The government’s making hay, and while this is not a bad thing, it throws up the question of “managed pricing” again. But hopefully, if prices of crude go back up, we will see the duties reduce. More importantly, though, it tells you about the lack of competition and the inefficiency in Oil Marketing Companies. If there was true competition, one would price slightly higher than the other, but they behave like a cartel.

But this is the smoothest way to make money; you don’t mind paying the cost, because it cost you about that much anyhow (and there is a small cut in retail prices). The government makes its money. If crude prices go up, the government can adjust the excise duty to reduce the impact. But it does bring back the fear of administered pricing – which is exactly what we are getting; for a change, we are administered higher prices.

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