The central government has increased the excise duty (a kind of tax) on petrol and diesel by Rs 2 per litre, even though international crude oil prices are going down. This move comes just after the Union Budget 2025, where the government gave tax relief to the middle class. Now, it seems the government is trying to increase its income to spend on development projects.
Will This Impact Common People?
According to the government, the hike won’t directly affect the common man, as retail fuel prices may remain unchanged for now.
However, from tomorrow, LPG cylinder prices will go up by Rs 50, which will impact household budgets.
Why No Fuel Price Cut Yet?
Even though global crude oil prices are falling, fuel prices in India haven’t gone down.
Oil Minister Hardeep Singh Puri said the government is following a “wait and watch” approach. If oil prices keep falling, there is a chance that petrol and diesel prices may be reduced in the future.
Where Will the Extra Money Go?
Finance Minister Nirmala Sitharaman had reduced personal income tax in the budget, which lowered the government’s tax income.
Also, windfall taxes on big oil companies like Reliance and Nayara were removed.
So, the extra Rs 2 collected from fuel will help the government cover the losses of oil companies due to cheaper LPG cylinders given earlier.
Read More: Government’s ₹2 Fuel Tax Hike: What It Means for Your Wallet
Has This Happened Before?
Yes, the Modi government has done this before.
- From 2014 to 2016, they increased excise duty 9 times, when global oil prices crashed.
- Excise collections rose from Rs 99,000 crore in FY15 to Rs 2.42 lakh crore in FY17.
- Over the years, excise duty was cut and raised many times depending on global oil trends.
In March and May 2020, even when oil prices hit historic lows (even below zero), the government increased excise duty sharply by Rs 13 on petrol and Rs 16 on diesel.
Later, when oil prices went up, the government reduced some of the duty to control rising fuel costs.
Just before the 2024 elections, the Centre had cut fuel prices by Rs 2 per litre to give relief to the public.
Also See: Is Trump Considering a 90-Day Tariff Pause for All Countries? White House Responds
In Short:
Even though global oil is getting cheaper, the government has increased fuel taxes to balance the budget after giving tax cuts and helping oil companies. But the benefit of cheaper crude oil has not yet reached Indian consumers.
