Announcing the decision, Finance Secretary Hasmukh Adhia, in a joint press conference with FM Arun Jaitley, explained why the excise duty cut of Rs 2 will have no impact on the petrol and diesel prices.
”2 Rs 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,” the Finance Secretary said.
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.
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.