Excise Duty On Petrol And Diesel Increased By Rs 2: Is It Going To Impact Fuel Prices?

The central government on Monday increased the excise duty for both Petrol and Diesel by Rs.2. The revenue department of the Ministry of Finance released a notification that established excise duty on petrol at Rs 13 per litre and Diesel at Rs. 10 per litre. The order of excise duty further stated that the hike had been imposed by the Centre in the public interest, under section 5A of the Central Excise Act, 1944 and section 147 of the Finance Act, 2002.

The order from the revenue department did not specify what it would mean for the retail prices. However, the Ministry of Petroleum and Natural Gas (MoPNG) has clarified via X, that these prices will not affect the retail prices of either fuel, subsequent to the increase effected in excise duty rates today.

However, the hike is directly expected to impact oil marketing companies, as they are likely to absorb the cost limiting the effect not carrying it to the retail price. This hike will reduce their marketing margin by Rs 2 per litre. The integrated margin that OMCs earn from retail fuel sales currently exceeds Rs 11 per litre.

Meanwhile, the prices of crude oil have taken a significant hit after US President Donald Trump started levying massive tariffs on various goods coming to the US.

The government's announcement on excise duty has triggered a decline in the shares of oil marketing companies, with BPCL, HPCL, and IOCL falling by as much as 6.2 per cent, 4.3 per cent, and 6 per cent, respectively. The move was largely in line with market expectations, which had already factored in a potential reduction in OMCs’ marketing margins—either through a cut in retail fuel prices or an increase in excise duty.

As of March 1, the retail price of petrol in Delhi stood at ₹94.77 per litre. This comprised a base price of ₹54.84, freight charges of ₹0.24, excise duty of ₹19.90, dealer commission of ₹4.39, and value-added tax (VAT) of ₹15.40.

Congress Attacked on Modi Government Amid Price Hike

The hike declared on Monday in excise duty on Petrol and Diesel drew criticism from congress leader Malikarjun Kharge, who accused the Modi government of exploiting the situation when the crude oil prices have internationally plummeted significantly. He also pointed out that since May 2014, crude oil prices have fallen by 41 per cent, yet the government keeps raising the excise duty instead of passing on the benefit of this fall to the consumers.