Petrol price on Thursday was cut by Rs 6.07 per litre and diesel price by Rs 11.75 in Delhi as oil companies passed on a record reduction in excise duty rates to consumers. Buckling under pressure, the government had on Wednesday cut excise duty on petrol by Rs 5 per litre and that on diesel by Rs 10 a litre to give reprieve to consumers battered by record high retail fuel prices. Since states charge local sales tax or VAT not just on the base price but also on the excise duty levied by the centre, the total incidence of price reduction is higher.

Petrol will cost Rs 103. 97 per litre in Delhi against Rs 110. 04 per litre, according to a price notification of state-owned fuel retailers. Diesel rates accordingly will reduce to Rs 86. 67 per litre from Rs 98. 42 per litre. In Mumbai, petrol price has been cut by Rs 5.87 to Rs 109.98 per litre and diesel by Rs 12.48 to Rs 94.14 per litre. Kolkata saw the price of diesel being reduced by Rs 5.82 to Rs 104.67 per litre and that of diesel by Rs 11.77 to Rs 89.79 per litre.

Petrol price in Chennai has been reduced by Rs 5.26 to Rs 101. 40 per litre and diesel by Rs 11.16 to Rs 91.43 per litre. VAT rates differ from state to state, leading to differential rates of fuel. The excise duty cut announced on Wednesday night is the highest-ever reduction in excise duty. It rolls back a part of the Rs 13 and Rs 16 per litre increase in taxes on petrol and diesel effected between March 2020 and May 2020 to avoid passing on to consumers the sharp fall in international oil prices.

The hike in excise duty had taken central taxes on petrol to their highest level of Rs 32. 9 per litre and that on diesel to Rs 31.8 a litre. Reducing the excise duty, the Union government also urged states to commensurately reduce VAT on petrol and diesel to give relief to consumers. Six BJP-ruled states of Uttar Pradesh, Goa, Karnataka, Uttarakhand, Tripura and Bihar reduced VAT.

The tax cut follows an unrelenting hike in international oil prices pushing pump rates across the country to their highest-ever levels. While petrol soared to above Rs 100-a-litre-mark in all major cities, diesel had crossed that level in more than one-and-a-half dozen states.

The total increase in petrol price since the May 5, 2020 decision of the government to raise excise duty to record levels had totalled Rs 38.78 per litre. Diesel rates have during this period gone up by Rs 29. 03 per litre. The relentless increase in fuel prices had been severely criticised by Opposition parties, particularly Congress which had demanded that the government reduce its excise duty.

Based on April to October consumption numbers, the loss of revenue to the government due to the excise duty cut will be Rs 8,700 crore per month. This totals to an annual impact of over Rs 1 lakh crore, industry sources said. For the remainder of the current fiscal, the impact would be Rs 43,500 crore.

Data available from the Controller General of Accounts (CGA) in the Union Ministry of Finance showed excise duty collections during April-September 2021 surged to over Rs 1. 71 lakh crore from Rs 1. 28 lakh crore mop-up in the same period of the previous fiscal. For the full 2020-21 fiscal, excise collections were Rs 3. 89 lakh crore and Rs 2. 39 lakh crore in 2019-20, the CGA data showed.

After the introduction of the Goods and Services Tax (GST) regime, excise duty is levied only on petrol, diesel, ATF and natural gas. All other goods and services are under the GST regime.

Minister of State for Petroleum and Natural Gas Rameswar Teli had in July told Parliament that the union government’s tax collections on petrol and diesel jumped by 88 per cent to Rs 3. 35 lakh crore in the year to March 31, 2021 (2020-21 fiscal) from Rs 1. 78 lakh crore a year back. Excise collection in pre-pandemic 2018-19 was at Rs 2. 13 lakh crore.

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