As fuel prices continue to hit new highs, the government is considering a cut in excise duty and the ministry of petroleum and natural gas has already written to the finance ministry, suggesting a cut in the duty.
“When global crude oil prices were low, excise duty was increased. Now, the government is considering a cut,” a source told Moneycontrol.
The prices of petrol and diesel touched a record high of Rs 85.45 a litre and Rs 75.63 a litre, respectively, in Delhi on January 22. In Mumbai too, fuel rates increased to a new record high of Rs 92.04 a litre on petrol and Rs 82.40 a litre on diesel.
But, why are petrol and diesel prices on the rise?
The price of Brent crude had crashed from $66 per barrel in early 2020 to $19 per barrel in April mainly because of lockdown in various countries and travel restrictions that resulted in lower crude and fuel demand. From that record low, Brent crude prices touched $55.37 a barrel at one point on January 22, 2021.
The government had raised excise duty in March when crude oil prices were down. The excise duty on petrol was raised to Rs 32.98 per litre from Rs 19.98 and diesel to Rs 31.83 per litre from Rs 15.83. Every Re 1 a litre increase in excise duty adds approximately Rs 14,500 crore to the government’s kitty.