The excise duty on petrol and diesel will be reduced by Rs 5 and Rs 10 respectively from today, the government has announced on the eve of Diwali, aiming to provide relief to people reeling under the impact of spiralling fuel prices.
Prices of Petrol and Diesel will come down accordingly, sources said.
The reduction in excise duty on diesel will be double that of petrol and will come as a boost to the farmers during the upcoming Rabi season, the government said in an official statement.
States have been urged by the Centre to reduce value added tax (VAT) on both the fuels to give relief to consumers.
The move has come when the opposition has been regularly attacking the government on rising fuel prices. On November 1, Congress leader Rahul Gandhi had tweeted while referring to petrol and diesel rates, that one should beware of "pickpockets".
"Beware of pickpockets," he said in a tweet in Hindi, using the hashtag "#TaxExtortion".
Citing a news report along with his tweet, Mr Gandhi had said that petrol prices in some states have crossed Rs 120 a litre and Centre had collected Rs 2.3 lakh crore in 2018-19 and Rs 2.58 lakh crore in 2017-18 by way of fuel taxes.
Meanwhile, the reduction in excise duty on fuel prices has been announced at a time when petrol and diesel prices have been touching all time highs across the country, crossing the Rs 100 mark in all the major cities of the country, including the four metros.
While petrol prices have crossed the Rs 100 mark in all the four metros, diesel prices too have gone past the coveted mark in three metro cities while it is at Rs 98.42 per litre in the national capital.
In fact Petrol prices have risen by about Rs 34 per litre in two years and Rs 26 in a year on a steep climb in global oil prices and taxes. Diesel prices have increased by Rs 29.5 per litre in two years and Rs 25 in a year.
Also the relief in itself will only be a marginal one, as excise duty on petrol has been reduced only by Rs 5 per litre. If the break up of petrol price in New Delhi is taken as an example, then out of the total cost of Rs 109.69 (at which it was being sold two days back), the component of excise duty is Rs 32.90 per litre.
Therefore even if excise duty is cut by Rs 5, then petrol price will come down only to Rs 105.69 per litre in the national capital, which is still at a high and way beyond the Rs 100 mark.
On Wednesday, petrol price in Delhi stood at Rs 110.04 per litre while diesel was being sold for Rs 98.42. In Mumbai, petrol price was Rs 115.85 while diesel stood at Rs 106.62 per litre.
Excise duty on petrol was hiked from Rs 19.98 per litre to Rs 32.9 last year to recoup gain arising from international oil prices plunging to multi-year low as pandemic gulped demand.
The decision is being seen as a Diwali sop to the burdened consumers, though earlier this week, prices of LPG cylinders had been hiked by oil marketing companies by Rs 266, adding to the burden of the common man.
I thank PM @narendramodi Ji for the significant reduction in Excise Duty on Petrol & Diesel. A big relief for fuel consumers, particularly our farmers just ahead of Rabi season. The states should add to this celebration by reducing VAT on fuel to give further relief to consumers.— Hardeep Singh Puri (@HardeepSPuri) November 3, 2021
Meanwhile, the government further said that reduction in excise duty on petrol and diesel will also boost consumption and keep inflation low, thus helping the poor and middle classes.
"Today's decision is expected to further spur the overall economic cycle," the official statement said.
In recent months, crude oil prices have witnessed a global upsurge. Consequently, domestic prices of petrol and diesel had increased in recent weeks exerting inflationary pressure, official sources said.