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Perhaps for the first time petrol in India costs more than jet fuel (ATF) used in aeroplanes as the government has levied a record excise duty on the fuel used in two-wheelers and cars. A litre of petrol in Delhicosts Rs 58.91 per litre.

On the other hand aviation turbine fuel (ATF) is a heavier fraction in the distillation process is priced at Rs 52.42 a litre. Traditionally petrol would cost less than ATF. However four consecutive excise duty hikes in three months have reversed this. After four duty hikes totalling Rs 7.75 per litre petrol now attracts highest ever excise rate of Rs 16.95 per litre.

According to data available from petroleum ministry excise duty on petrol was Rs 10.53 per litre in April 2002 when the fuel was first deregulated or freed. This rose to Rs 14.59 by May 2005 by when government control was back in place. Excise duty on petrol touched its peak of Rs 14.78 in March 2008 before it was slashed to Rs 9.48 in 2012. The fuel was again deregulated in June 2010 and since then retail rates have more or less moved in tandem with international trends. Since August the retail rates have been on the decline as global oil prices slumped to multi-year lows. In nine cuts petrol price has been reduced by a cumulative Rs 14.69 per litre.

This reduction would have been higher but for the excise duty hikes - first by Rs 1.50 on November 12 then by Rs 2.25 on December 2 and Rs 2 each on January 2 and January 16. Government raised excise duty to meet its budgetary deficit. It had collected Rs 94164 crore or 52 per cent of the total excise collections from duty on petroleum products according to the ministry data.

The excise duty hike will give the government at least Rs 18000 crore more this fiscal The excise duty is made up of basic duty of Rs 8.95 special excise duty of Rs 6 and additional excise duty of Rs 2 per litre. ATF attracts an excise duty of 8 per cent. On diesel excise duty was Rs 2.85 a litre in April 2002 which rose to Rs 4.74 in March 2008 before dipping to Rs 2.06.

It now stands at Rs 9.96 per litre the highest ever. The fuel was deregulated in October and has seen five retail price cuts totalling Rs 10.71 a litre. These cuts would have been higher but for the excise duty hikes - Rs 1.50 on November 12 Re 1 on December 2 and Rs 2 each on January 2 and January 16. Diesel currently costs Rs 48.26 the lowest since April 2013. Petrol in April 2002 was priced at Rs 26.54 a litre while diesel cost was Rs 16.59 per litre.

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Publication:Pakistan & Gulf Economist
Date:Feb 1, 2015

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