The economic crisis triggered by the Covid-19 pandemic and subsequent pressure on revenues may again push the Centre to raise excise duty on petrol and diesel. Sources indicated that another ?3-6 per litre increase in excise duty on petrol and diesel may come soon if the government felt the need to mobilise more resources to finance additional economic recovery packages to fight Covid-19 related disruptions. This level of the increase could provide government additional revenue to the tune of Rs 60,000 for the full year. In the balance period, about ?30,000 crores could be mobilised.
An internal examination to look at duty structure on the two products is on and exact timing of the announcement may be finalised soon, sources indicated. Government wants that any duty hike on petrol and diesel should not result in an increase in the retail price of the two products as it would not be popular with the consumers besides the increase could have inflationary implications on the economy. Experts said that current juncture would be ideal for an excise duty on petrol hike as petrol and diesel prices have not been revised for the past almost a month even though global crude prices have softened and reached about $ 40 a barrel from a month ago high of over $ 45 a barrel. For consumers, any further increase in duty should not impact much as retail prices may be left unchanged or marginally increased as lower oil prices would allow for absorbing any increase in price. However, a further increase in taxes on fuel would make the product most taxed globally. The current taxes account for close to 70 per cent of the price of petrol and diesel. With any further increase in duty, this could reach 75-80 per cent level.
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