Excise duty on petrol, diesel to give big boost to Centre’s revenue kitty

The Centre is projected to earn over ₹10 lakh crore from levies on petrol and diesel between 2014-15 and 2018-19.

Official data show that the Centre’s gross revenue collections from petroleum products has risen steadily in these five years from ₹1.05 lakh crore in 2014-15 to a projected ₹2.57 lakh crore in the next fiscal, accompanied by an increase in excise duties.

Prior to this, in 2013-14, the gross revenue collection from petroleum, oil and lubricants (POL) was ₹88,600 crore. (See chart)

Finance Ministry officials have time and again pointed out that revenue from excise duty on POL products is a significant source of funds that has helped the government keep the fiscal deficit in check and also enhance productive expenditure. “Duties on fuel have been a big source of revenue for both the Centre and States and help to fund expenditure,” said an official, pointing out that even States levy value-added tax on petrol and diesel. To this end, Finance Minister Arun Jaitley has, in the recent Budget, levied a road and infrastructure cess of ₹8 per litre on petrol and high speed diesel, which is estimated to raise ₹1,13,000 crore.

In turn, he withdrew the ₹6 a litre additional excise duty on petrol and diesel and cut the basic excise duty by ₹2 a litre.

Finance Secretary Hasmukh Adhia had said the re-jig of rates and the imposition of the cess would, however, have no impact on prices for retail consumers. Taking comfort from the low global crude oil prices, the Finance Ministry had, in successive rounds from November 2014 , increased the excise duty on fuel. The central excise duty on unbranded petrol rose from ₹9.20 a litre in November 2014 to a high of ₹21.48 a litre in July 2017 to ₹19.48 per litre at present. Similarly, the central excise duty on unbranded diesel in the period rose from ₹3.46 a litre (November 2014) to the current ₹15.33 a litre. In recent months, with global crude oil prices rising, the Centre has been under pressure to lower the excise duty and reduce retail prices.

Accordingly, the Finance Ministry had reduced duties by ₹2 a litre on October 4, 2017, which was expected to impact the exchequer by ₹13,000 crore in the remaining part of the fiscal year.

“The Central government also requested States to reduce VAT imposed by them on petrol and diesel to give more relief to consumers. Four States and one Union Territory have reduced VAT on petrol and diesel,” Minister of State for Finance Shiv Pratap Shukla informed the Lok Sabha recently.

But, despite a further increase in oil prices, the government has not taken a call on lowering excise duty rates.