NEW DELHI: In a big relief to consumers ahead of Diwali, the government on Wednesday announced a record reduction in excise duty on petrol and diesel.
Excise duty on petrol has been reduced by Rs 5 and that on diesel has been cut by Rs 10, the Centre said in an official release.
Consequently, petrol and diesel are set to become cheaper. The reduced prices will come into effect from November 4.
“The reduction in excise duty on diesel will be double that of petrol and will come as a boost to the farmers during the upcoming Rabi season,” the government said.
States have also been urged to reduce value added tax (VAT) on petrol and diesel to give relief to consumers.
Highest ever reduction
This is the highest-ever reduction in excise duty and rolls back a part of the Rs 13 and Rs 16 per litre increase in taxes on petrol and diesel effected earlier.
The Centre had raised excise duty by Rs 13 per litre on petrol and Rs 16 on diesel between March-May 2020 when oil prices crashed owing to the pandemic. The states had also followed suit with consequent rise in VAT.
The revision had raised excise duty by 65 per cent on petrol from Rs 19.98 to Rs 32.98 a litre and 79 per cent on diesel from Rs 15.83 to Rs 28.35.
Petrol, diesel prices were at record highs in most states
Fuel prices have been soaring to record highs since the past few months.
Petrol prices have increased on 28 of the previous 36 days, taking up its pump price by Rs 8.85 per litre.

In Delhi, a litre of petrol costs Rs 110.04, while diesel is priced at Rs 98.42 per litre.
Similarly, petrol costs Rs 115.85 per litre, while diesel is priced at Rs 106.62 per litre in Mumbai, the highest among all metros.

Rising prices of petrol and diesel was creating inflationary pressure on the economy, as a result of a global upsurge in crude oil rates.
“The government of India has made efforts to ensure that there is no energy shortage in the country and that commodities such as petrol and diesel are available adequately to meet our requirements,” the government said.
It believes that the reduction in excise duty on petrol and diesel will boost consumption and keep inflation rate low, thereby helping the poor and middle class of the population.
‘Cut in excise duty will cost Rs 1 lakh crore in revenue’
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, news agency PTI reported quoting industry sources.
For the remainder of the current fiscal, the impact would be Rs 43,500 crore.

Prior to the cut, the government’s collection from levy of excise duty on petroleum products had risen 33 per cent in the first six months of the current fiscal when compared to last year and was 79 per cent more than pre-Covid levels.
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