New Delhi: Excise duty on petrol and diesel was hiked by Rs 3 per litre on Saturday as the government looked to mop up gains arising from fall in international oil prices. Special excise duty on petrol was hiked by Rs 2 to Rs 8 per litre and to Rs 4 in case of diesel, an official notification said. Additionally, road cess on petrol was raised by Rs 1 per litre each on petrol and diesel to Rs 10.

The increase in excise duty would in normal course result in a hike in petrol and diesel prices but most of it would be adjusted against the fall in rates that would have necessitated because of slump in international oil prices.

Watch | Excise duty on fuel increased by Rs 3 per litre



However, lower global oil and product prices could provide cushion to the government not to raise the retail prices to that level and rather PSU oil marketing companies may be asked to absorb immediate need for a hike. This can be covered if oil prices keeps soft and falls further.

The current increase in duty and resultant hike in retail Price of petrol and diesel could have multiplier effect on the economy raising prices of several essential products and services and push up inflation.

In February, the consumer price inflation has fallen but this could rise on impact of higher transportation fuel prices.

(With inputs from agencies)