Heavy Excise duty imposed on Petrol & Diesel: Why retail prices are same? 

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The central government recently increased the excise duty on petrol by a steep Rs 13 per litre on diesel, and Rs 10 per litre on petrol to mobilise revenue collection at a time when the country has limited revenue sources. This comes amid the extremely low-priced crude oil in the International market currently.

Two separate official notification from the government suggested that excise duty on diesel is raised by Rs 8 and additional special additional excise duty Rs 5. In case of petrol, the excise duty is increased by Rs 8 and special additional excise duty of Rs 2 for a total effect of Rs 10.

These changes have come to effect from Wednesday, but you must be wondering why the retail prices of petrol and diesel (for common people) has not increased by the same amount. The price hike is going to be observed by Oil Marketing companies who were enjoying advantage due to lower price of crude oil in the international market.

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Break-up of diesel price in New Delhi

The retail oil price consists of different taxes and duties. Let’s understand with an example, the current price of Diesel in New Delhi. After the VAT hike by Delhi government, diesel price has increased to Rs 69.39 per litre. The break-up of fare includes the base price – Rs 18.49, Freight etc – Rs 0.29, Price charged to dealers excluding the VAT and excise duty- Rs 18.78, Excise duty – Rs 31.83, VAT – Rs 16.26 and dealer’s commission (average) Rs 2.52. The excise duty which is presently 31.83 was Rs 13 less but the retail price was the same, which means the oil companies like HP and Indian Oil were earning Rs 13 more.

Also, just to clear things, excise duty is imposed by the central government and the VAT (Value Added Tax) is imposed by various state governments.

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Excise duty on petrol and diesel was increased in March too

This is the second time when Modi government has increased the excise duty on petrol and diesel in the last two months. The excise duty on both petrol and diesel was increased by Rs 3 on March 14.

Roughly, every rupee hike in excise duty means that the government will get Rs 13,000 to Rs 14,000 crore more annually. The recent increase in excise duty is believed to result in a revenue gain of around Rs 2.85 lakh crore in 2019-20 fiscal year.

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