In a major relief for the common man, the prices of Petrol and diesel has been slashed by Rs 2 per litre each to moderate the relentless rise in fuel prices witnessed for the last three months.
Petrol and diesel will cost less from tomorrow after the first excise duty cut by the Modi government comes into effect.
Petrol currently costs Rs 70.88 per litre in Delhi while a litre of diesel is priced at an all-time high of Rs 59.14.
The excise duty cut would cost the government Rs 26,000 crore in annual revenue and about Rs 13,000 crore during the remaining part of the current fiscal year that ends on March 31, 2018, an official statement announcing the reduction said.
The government, which had between November 2014 and January 2016 raised excise duty on petrol and diesel on nine occasions to take away gains arising from plummeting global oil prices, has been criticised for not cutting excise duty despite a sustained rise in fuel prices since early July.
In all, duty on petrol was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months that helped government's excise mop-up more than double to Rs 242,000 crore in 2016-17 from Rs 99,000 crore in 2014-15.
Retail fuel prices have been on the upswing since July 4. Oil Minister Dharmendra Pradhan's predictions of a drop were short-lived as rates fell for just three days and reverted to their upward trajectory.
While petrol prices have increased by Rs 7.8 to reach Rs 70.88 a litre in Delhi, the highest since August 2014, diesel rates have risen by Rs 5.7 to touch an all-time high of Rs 59.14.
While the costliest petrol was sold in September 2013 when it was priced at Rs 76.06 a litre in Delhi, the previous highest rate for diesel was also during the BJP rule in September 2014 when it was priced at Rs 58.97 per litre.
"Govt of India has reduced Basic Excise Duty rate on petrol and diesel [both branded and unbranded] by Rs 2 per litre w.e.f. 4th October,2017," the finance ministry said in a tweet.
On petrol, the government currently levies excise duties totalling Rs 21.48 per litre while that on diesel is Rs 17.33 per litre.
"This decision (to cut excise duty) has been taken by the Government in order to cushion the impact of rising international prices of crude petroleum oil and petrol and diesel on retail sale prices of petrol and diesel as well as to protect the interest of common man," the statement said.
The rise petrol and diesel price, it said, also reflected in wholesale price inflation, which has increased to 3.24 per cent in August 2017, as compared to 1.88 per cent in July.
"This also prompted the Government to act swiftly in this regard," it said.
India relies on imports to meet 80 per cent of its needs and so domestic fuel rates have been aligned to movement of equivalent product prices in the international market since April 2002.
Previously, the rates were changed every fortnight but since June 16 they are revised daily to immediately pass on any movement in international oil prices to consumers and avoid sharp spikes by spreading them in small doses.
The windfall from the excise duty hikes helped the government bridge its budgetary deficit.
Normal or unbranded petrol currently commands a basic excise duty of Rs 8.48 per litre, special additional excise duty of Rs 7 a litre and additional excise duty of Rs 6. The total excise incidence on branded petrol is Rs 22.66 per litre with basic excise duty is charged at higher rate of Rs 9.66.
Unbranded diesel attracts basic excise duty of Rs 10.33 per litre, special additional excise duty of Re 1 and additional excise duty of Rs 6 per litre. Branded diesel attracts Rs 12.69 per litre basic excise duty, Re 1 a lire additional excise duty and Rs 6 special additional excise duty.
State-owned oil companies in June dumped the 15-year old practice of revising rates on 1st and 16th of every month and instead adopted a dynamic daily price revision to instantly reflect changes in cost. Rates during the first fortnight starting June 16 dropped but have been on the rise since July 4.
-With PTI inputs.