New Delhi, Feb 1: Presenting the Budget 2018 on Thursday, Finance Minister Arun Jaitley announced a Rs 2 cut in the basic excise duty on petrol and diesel. The government also decided to do away with an additional excise duty on fuel by Rs 6. However, despite all these deductions prices of the two major petroleum products will not come down.
On the one hand the government announced a cut in excise duties and on the other it introduced a new road cess of Rs 8 per litre on petrol.
Excise Duty Cut on Petrol, Diesel Won’t Bring Down Prices. Here’s Why
Budget 2018: Full Coverage
“Rs 2 excise on petrol and diesel is being reduced and this is being converted into cess, that is the only change we have made, practically there is no impact on the final price of petrol and diesel. To the consumers, there is no change,” Finance Secretary Hasmukh Adhia explained during a press conference after Arun Jaitley’s budget speech.
How would you rate @arunjaitley ‘s #Budget2018?
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Meanwhile, petrol prices approached a three-and-a-half-year high in Delhi on Thursday at Rs 73.05 per litre. The previous high in the national capital was Rs 73.60 a litre in July 2014, data from the Indian Oil Corp showed.
2 Rs excise on petrol and diesel is being reduced & this is being converted into cess, that is the only change we have made, practically there is no impact on the final price of petrol & diesel. To the consumers, there is no change: Hasmukh Adhia, Finance Secretary pic.twitter.com/U2HiUsd9pJ
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The development came shortly after FM Jaitley announced the government’s decision to cut excise duty on petrol and diesel by Rs 2.
The Modi government also abolished additional excise duty on fuel by Rs 6. While the government cut excise duty, a new road cess of Rs 8 per litre was also introduced.
FM Jaitley’s announced triggered speculation about prices of petrol and diesel coming down soon.
Notably, the prices of petrol and diesel have been increasing in the recent past due to the rising price of crude oil in international market and weakening Indian Rupee. According to data from the website of the Indian Oil Corporation, petrol price went up by Rs 2.95 in Delhi last month.
Reduction in excise duty
The government has cut excise duty by Rs 2 and it now stands at Rs 4.48 per litre. On diesel as well, the excise duty has been cut by Rs 2 to reach Rs 6.33 per litre.
How prices of petrol and diesel are determined
Oil marketing companies determine the prices of petrol and diesel on the basis of three factors. The first factor is the price of crude oil in the international market, the second factor is the value of Indian Rupee against US Dollar at the time of import. The third factor that determines the fuel prices is the prices of petrol and diesel in international markets.
However, there are some other factors as well that determine the prices of petrol and diesel.
On Wednesday, price of petrol in the city was Rs 72.92 per litre.
In the other key metros of Kolkata, Mumbai and Chennai, petrol prices reached landmark levels on Thursday with prices at Rs 75.74, Rs 80.91 and Rs 75.77 per litre.
The previous highs in the cities were Rs 76.14 (Kolkata, August 2014), Rs 81.75 (Mumbai, July 2014) and Rs 75.78 (Chennai, August 2014).
