The Petrol price was on Wednesday cut by ₹ 2.5 a litre and diesel by ₹ 2.25 following a reduction in excise duty on auto fuels.
Petrol in Delhi now costs ₹ 68.38 a litre, down from ₹ 70.88. A litre of diesel will now cost Rs. 56.89, against ₹ 59.14 previously, according to Indian Oil Corporation (IOC).
On Tuesday, the government cut the excise duty on petrol and diesel by ₹ 2 a litre each to moderate the relentless rise in fuel prices over the last three months.
IOC Director (Finance) A K Sharma said the cut in retail selling price was higher after factoring in its impact on the VAT.
As things stand, excise duty is levied on fuel produced ex-refinery. Local sales tax or the VAT is levied on the total of ex-refinery cost plus excise duty and commission paid to dealers.
So, till Tuesday, the VAT on petrol in Delhi was ₹ 15.07, while on Wednesday it stands at ₹ 14.54. On diesel, the VAT on Wednesday is ₹ 8.41, against ₹ 8.73 previously.
The excise duty cut paused the relentless rise in rates witnessed since July 4. While the petrol prices increased by ₹ 7.8 to reach ₹ 70.88 a litre in Delhi on Tuesday, the highest since August 2014, the diesel rates rose by ₹ 5.7 to touch an all-time high of ₹ 59.14.
The excise duty cut would cost the government ₹ 26,000 crore in annual revenue and about Rs 13,000 crore in the remaining part of the current fiscal year that ends on March 31, 2018, the government said on Tuesday.
Government comes under criticism
The government, which had, between November 2014 and January 2016, raised excise duty on petrol and diesel on nine occasions to take away the gains arising from plummeting global oil prices, has been criticised for not cutting excise duty despite a sustained rise in fuel prices from early July.
In all, the duty on petrol was hiked by ₹ 11.77 a litre and that on diesel by ₹ 13.47 in those 15 months that helped government’s excise mop up more than double to ₹ 2,42,000 crore in 2016-17 from ₹ 99,000 crore in 2014-15.
While the costliest petrol was sold in September 2013 when it was priced at Rs 76.06 a litre in Delhi, the previous highest rate of diesel was also during the BJP rule in September 2014 when it was priced at Rs 58.97 a litre.
On petrol, the excise has been cut to ₹ 19.48 from ₹ 21.48 and on diesel to ₹ 15.33 from ₹ 17.33 previously.
The rise in the petrol and diesel prices also reflected in wholesale price inflation, which increased to 3.24 per cent in August 2017, compared to 1.88 per cent in July.
