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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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  • ]{umar says:

    The government is using taxes and duties instead of outright subsidies to administer prices. This is less distortionary than pure subsidies. Its not a bad thing. When oil prices rise (and they most certainly will after a period of supply rationalization), the government may choose to lower the duties and taxes slower than the actual price rise and in effect force people to become more price sensitive and efficient. Or they could cut them much faster in case we are in a election year.

  • Jatin says:

    looks like gov has focused more on price regulation instead of deregulation.

  • There is no assurance that Excise duty will go down. Govt is exploiting the situation instead of passing on. Deregulation means Deregulation like Gold. Lets have fixed Excise duty irrespective of Oil price. In order to bring back fiscal deficit, Govt cant use this kind of measures.

  • JustSaying says:

    Generally people have short memory span. If the prices rise again and there are sudden increases in the prices, then definitely people (read media and political parties) will make a big scene out of it! So it is better to do this way and save us from unnecessary outrage.
    Luck is really favouring this Government, as reduced fuel prices are help the Government to curtail fiscal deficit and trade deficit. Would love to see revised estimates of fiscal deficit now with increased duties, supposed non-plan expenditure cut by the Government, etc.