Excise duty on petrol and diesel may be cut ahead of Assembly elections

With petrol and diesel prices skyrocketing, the Centre is likely to cut excise duty by up to Rs 5 and exhort BJP-ruled states to match it by slashing local taxes on both transport fuels. The move may be announced ahead of Assembly elections in Assam, West Bengal, Tamil Nadu, Kerala and Puducherry.

Elections in these states will begin from March 27.

Excise duty on petrol was raised by Rs 13 a litre and on diesel by Rs 16 a litre between March and May last year. Central and state taxes make up for about 60% of the retail selling price of petrol and nearly 55% of diesel. Excise alone now stands close to Rs 32 on diesel and Rs 33 a litre on petrol.

Also read: Govt can cut excise duty on petrol, diesel by Rs 8.5/litre without hurting revenues, say analysts

Pump prices of petrol have crossed Rs 100 in a few states, including Rajasthan and Madhya Pradesh -- states with one of the highest local taxes on the transport fuel. Rising fuel prices have not only put commuters to hardship but has also led to rise in freight rates and is likely to spike inflation across manufactured goods.

“Vigorous consultations are on between ministries (finance, commerce, transport and petroleum), with state governments and public sector oil companies on how to reduce transport fuel prices without putting a burden on the central or state exchequer,” said an official.

An official said excise duty cut could be announced. He said there is space to cut it by up to Rs 5 a litre.