Petrol and diesel will be costlier by Rs. 2 a litre because of additional duty and cess, Finance Minister Nirmala Sitharaman announced in her Budget 2019 speech on Friday. An additional excise duty and cess of Re 1 each will be added to the cost per litre.
This will lead to a significant jump in revenue for the government, which is looking to contain its fiscal deficit to 3.3 per cent of GDP this year. Taxes on petrol and diesel, which account for more than a third of retail fuel prices, are one of the biggest sources of income for the government.
"Crude prices have softened from their highs. This gives me room to review excise duty and cess on petrol and diesel. I propose to increase special additional excise duty and road and infrastructure cess each one by 1 rupee a litre on petrol and diesel," said the Finance Minister.
The government, she said, would ensure that the hike doesn't impact the people. "We are going to compensate. It will not impact the common public," she said, adding the money would be used for infrastructure purposes.
Usually, duties have been cut when global crude prices increased. But in recent years, the government has raised excise duty even when global prices fell.
In October last year, the government had to cut down on excise on fuel after a record, unrelenting rise in crude prices. The Centre also asked the state governments to match the cut. All BJP-ruled states had complied.
The low prices had continued through the assembly polls in the heartland states of Rajasthan, Madhya Pradesh and Chhattisgarh, and the staggered seven-phase general elections.
There were expectations that the government will recoup the losses once the elections are over.
The Congress objected to the price hike. Senior party leader Shashi Thraoor said the hike will "hugely impact inflation" and will "place the common man under huge pressure".
Mr Tharoor also criticized the budget, saying, "I didn't see any special roadmap for a 5-trillion dollar economy".