NEW DELHI 02/Dec/2014: The government has raised the excise duty on petrol byRs 2.25 per litre and diesel by Rs 1 per litre without raising retail prices, the second such move in three weeks that will split the benefit of the steep fall in crude oil prices between consumers and the exchequer. Consumers have already gained with a 11% fall in petrol prices and 8% cut in diesel in recent months as crude oil entered a bear market and plunged about 37% since June. For the government, it means additional revenue of Rs 10,000 crore in the current fiscal year, which will help meet India\'s fiscal deficit target of 4.1% of gross domestic product. This includes Rs 4,000 crore from Tuesday\'s tax increase and balance from higher tax of Rs 1.50 per litre on both the fuels announced last month. The steep fall in oil prices is a blessing for the Narendra Modi government as analysts say that meeting the country\'s fiscal deficit target would be a challenge because it had touched 89.6% of fullyear estimate in only seven months of the fiscal. The government\'s finances have been stretched because of subdued tax revenue and delayed disinvestment. Tax revenue was only 37.7% of the budget target at the end of last month because of weak indirect tax collections.
The government could raise excise duties on transport fuel without raising prices because petrol and diesel were being sold at a price higher than the market rate despite the December 1 decision to slash pump prices of petrol by 91 paise a litre and diesel by 84 paise per litre. Pump dealers said retail price reductions were not commensurate with falling international crude oil prices despite seven consecutive price cut in petrol since August and three in diesel rates. Although global crude oil prices fell by about 40% since June this year, but refiners have slashed market-priced LPG rates by 17%, aviation turbine fuel (ATF) 14%, petrol by 11% and diesel by 8%, dealers said.
Brent crude fell to $72 per barrel from $115 in June this year. Oil industry executives say that the international price of refined products often takes time to adjust to the fall in crude oil prices. A senior industry executive said state oil companies are taking hit and not raising petrol and diesel prices despite the excise duty hike. Falling international oil prices have also helped the government in substantially reducing state oil firms\' estimated revenue losses to about Rs 80,000 crore in the current financial year compared to Rs 1,39,869 crore actually incurred in 2013-14 for selling diesel, kerosene and cooking gas below market rate.vvv