New Delhi: After several states have increased VAT charges on two fuels making petrol and diesel costlier, the government has now increased the excise duty on petrol by a record Rs 10 per litre, and on diesel by Rs 13 per litre. However, it has been stated that the prices will not impact the consumers as the retail prices of petrol and diesel at the pump will remain unchanged despite the steep tax hike.

The three state-run oil marketing companies — Indian Oil Corp, BPCL and HPCL are going to absorb the entire hike in the excise duty. The government will likely garner Rs 1.6 lakh crore from the hike, the PTI report informs.

Which charges have been raised?

In two different notifications additional excise duty on petrol has been increased by ₹8 and special additional excise duty of ₹2 a litre has also been levied on the same taking it to a ₹10 a litre increase on petrol. While for diesel, additional excise duty has been hiked by ₹8 and special additional excise duty by ₹5 making it Rs 13 per litre.

Earlier in March, the duty on auto fuels was raised by Rs 3 each in wake of fears related to a recession that pulled down the oil prices.

The prices of the two fuels in the country are determined through a market-linked pricing regime namely trade parity pricing for petrol and diesel in which no subsidy is offered. The retail prices of petrol and diesel remain deregulated. The governments both Centre and state had used petrol and diesel as cash cows, raising duties to boost the exchequer’s tax revenue.

How will it impact you?

The base price of petrol is only about 40 per cent of its retail price while the rest of the cost includes central and state government taxes, duties, and cess besides transportation costs.

When global oil prices tumble, it opens up the opportunity to hike taxes without impacting the retail prices although consumers don’t get any benefit from the falling price to the extent of hike in duty. It means there will not be any change in the retail price or what you pay at the pump.

In the process, the government is trying to collect more taxes from retail fuel, which can be used to balance other losses in revenue.

In the same context, the oil marketing companies too didn’t pass on the benefit to the retailers and consumers and instead used the low crude oil prices to offset their own losses.

As the nationwide lockdown has restricted the movement of vehicles it had led to a severe slump in fuel denting the business of oil marketing companies.