Fuel tax hikes net Centre Rs 1.8 lakh crore extra revenue

Estimated total excise duty collections on petrol and diesel stand at Rs 3.9 lakh crore, a 77% jump from the previous year’s Rs 2.2 lakh crore.

Published: 29th May 2021 11:05 PM  |   Last Updated: 30th May 2021 11:47 AM   |  A+A-

Petrol, Fuel

For representational purposes (Photo | EPS)

Express News Service

CHENNAI : The Centre’s massive excise duty hikes on auto fuels netted it around Rs 1.8 lakh crore in additional revenue during the last fiscal year 2020-21, calculations based on the Union petroleum ministry’s fuel consumption data show. 

Estimated total excise duty collections on petrol and diesel stand at Rs 3.9 lakh crore, a 77% jump from the previous year’s Rs 2.2 lakh crore.

This, even as total petrol and diesel consumption during the year contracted by 10.6%, impacted as they were by lockdowns enforced to contain the pandemic. 

The extra revenue comes from excise duty hikes the Centre made between March and May 2020, siphoning off to the exchequer the benefits of the summer’s record fall in crude oil prices.

The increases (Rs 13 per litre for petrol and Rs 16 per litre for diesel) have helped offset the fall in other sources of tax revenue, but at the cost of keeping retail fuel prices high. 

Central excise duties currently stand at Rs 32.9 for a litre of petrol and Rs 31.8 for a litre of diesel. Combined with Value Added Taxes (VAT), which differ from state to state, they make Indians among the world’s most taxed fuel consumers. In Chennai on Saturday, petrol was being sold at Rs 95.51 per litre, with central duties comprising 34 per cent of the retail price and state VAT (Rs 22.84/litre) accounting for another 24 per cent. Diesel, taxed at similar levels, was priced at Rs 89.39 per litre. 

Unlike retail fuel prices, which have steadily risen by 32% for petrol and 36% for diesel between March 16, 2020 (when the first set of hikes were imposed) to now, crude oil prices plunged from $68 in January 2020, to a low of below $20 in April 2020, before slowly climbing back to breach January levels in December 2020. Brent crude currently trades at $68-70 per barrel. 

As for the exchequer, while dependence on fuel taxes has grown steadily for a few years, the excise duty hikes and the decline in other sources of tax revenue during the pandemic has accelerated the trend.

Central excise duties on petroleum products accounted for nearly a fifth of India’s Rs 20 lakh crore gross tax revenue in FY21. In FY20, this number had stood at  11%; in FY15 it had been 8%. 

The most recent update from the Union petroleum ministry’s Petroleum Planning and Analysis Cell (PPAC) shows that states had collected Rs 1.3 lakh crore in sales tax and VAT on petroleum products in the nine months ended December 2020.

State VAT levels vary across states, however, and petrol prices have gone past the Rs 100 per litre mark in several locations in high-VAT states such as Rajasthan, Maharashtra, and Madhya Pradesh. On Saturday, petrol prices in Mumbai breached the Rs 100 per litre barrier. 

Large duty cuts unlikely

Aside from the political fallout of high taxes, the government also has to contend with the inflationary pressures exerted by high fuel rates. However, economists note that it is unlikely that excise duties will be reduced significantly this fiscal year.

“It is very unlikely, they do not have the (fiscal) space,” said Madan Sabnavis, chief economist, Care Ratings, “The lockdowns to contain the second wave are widespread and demand has been hit. Naturally, this means your GST collections are going to fall”. 


Petrol and diesel prices continued to see increases on Saturday, with oil marketing firms hiking petrol prices by 26 paise per litre and diesel by 28 paise a litre.

The hikes, the fifteenth such instance this month, took fuel prices to record highs in many locations.

In financial capital Mumbai, petrol now costs Rs 100.19 a litre and diesel Rs 92.17 per litre


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