petrol excise duty: Rs 2/ltr additional excise duty on petrol, diesel put off by one month

To give the sector so much time to apply the measure, the government has delayed the levy of an additional Rs 2 per litre excise duty on petrol and diesel that are not doped with ethanol and bio-diesel by one month.

The finance ministry announced late Friday (September 30) in a Gazette notification that the additional excise tax will now be levied beginning November 1, 2022.

Union Finance Minister Nirmala Sitharaman proposed a Rs 2 per litre additional levy on petrol and diesel that are not blended with ethanol or biodiesel in her Budget for the financial year starting April 2022. This duty was supposed to go into effect on October 1, 2022, but it has now been pushed back to November 1.

Currently, 10% ethanol extracted from sugarcane or surplus foodgrain is merged or mixed in gasoline with the goal of reducing oil import dependence and providing farmers with an additional source of income.

“Blending of fuel is a priority of this government. To encourage the efforts for blending of fuel, unblended fuel shall attract an additional differential excise duty of Rs 2 per litre from the 1st day of October 2022,” Sitharaman had stated in her Budget speech in the Lok Sabha on February 1.

In the September 30 notification, her ministry stated that “petrol which is intended for retail sale, not so blended with ethanol or methanol” will attract Rs 3.40 per litre basic excise duty effective November 1, 2022, instead of Rs 1.40 a litre currently.

Branded petrol, not doped with ethanol, will attract Rs 4.60 a litre excise duty as against Rs 2.60 currently.

In the case of diesel, it said the fuel “intended for retail sale, not so blended with alkyl esters of long chain fatty acids obtained from vegetal oils, commonly known as bio-diesels” shall attract Rs 3.80 a litre basic excise duty instead of Rs 1.80. Branded diesel will attract Rs 6.20 a litre basic excise levy as against Rs 4.20 currently.

Petrol and diesel are subject to a cess and a special additional excise duty in addition to the basic excise duty. The total excise incidence on petrol is Rs 19.90 per litre, while diesel is Rs 15.80.

While the additional duty will force oil companies to purchase more ethanol for mixing in gasoline and plan logistics for transporting it to deficient areas, industry officials believe the country will be unable to build the infrastructure required to manufacture bio-diesel on a large scale for blending in diesel.

To help reduce its reliance on costly oil imports, the government set a target of 20% ethanol blending with gasoline by 2025, five years earlier than its previous target. Earlier this year, 10% ethanol blending was achieved.

India is the world’s third-largest oil importer, with foreign suppliers meeting more than 85% of its oil demand.