Govt may hike excise duty on fuel

Despite rising fuel prices, there are indications that the government may raise excise duty on petrol and diesel to mop up more revenues in the wake of falling tax and non-tax kitty.

Petrol prices on Monday touched their highest since November 28, 2018, selling within a touching distance of Rs 74 per litre in Delhi and even higher at Rs 76.44 per litre in Bengaluru. Diesel too rose to a multi-month high.

The hike in excise duty may, however, happen at a later stage when crude oil prices soften leading to a downward revision in the cost of petrol and diesel.

There could be an excise hike of up to Rs 2 per litre on both fuels, informed sources said, adding this is one of the options before the government to shore up revenues.

Prior to this, the government had hiked excise duty and road infrastructure cess on petrol and diesel by Re 1 a litre each in July to part-fund the Union Budget for 2019-20.

A Re 1 increase on petrol and diesel can roughly fetch Rs 14,000-Rs 15,000 crore to the exchequer.

Petrol and diesel prices have been rising on a daily basis since September 16, a day after the drone attack on Saudi Arabia's largest oil processing plant Aramco, which sent Brent crude futures rising over 19% to trade at $71 a barrel. This was the biggest gain in percentage terms since 1991. Crude prices have since come down to $63.80 a barrel on the hopes of resumption of Saudi oil production by next week.

But on Monday, prices rose again after Iran warned that the presence of US forces in the Gulf was causing instability in the region.

Every dollar increase in crude prices raises India's import bill by $1.5 billion. Eevry $10 jump in crude leads to a hike of upto Rs 6 on petrol and diesel prices and impacts GDP growth by about 40 basis points.

In Bengaluru, petrol prices rose to Rs 76.44 a litre on Monday while diesel sold at Rs 66.93 a litre. In Delhi, petrol sold at Rs 73.91 per litre while, in Mumbai it was Rs 79.57 a litre and Chennai, Rs 76.83 a litre.

Rising oil prices impact India in more ways than one as the country is a net importer of crude oil and ships close to 80% of its domestic consumption from abroad.

Rise in oil prices puts undue pressure on the rupee, making it weaker against the US dollar.