Petrol price cut by Rs 2.42 per litre, diesel Rs 2.25 per litre; excise duty hiked

New Delhi: The government hiked excise duty on petrol and diesel by Rs 2 per litre each to take away gains coming by way of global oil prices dipping to six-year lows.

This is the fourth increase in excise duty on the two fuels since November and cumulatively customers have been denied the benefit of Rs 7.75 per litre reduction in petrol and Rs 6.50 a litre cut in diesel rates that was warranted due to the slump.

Petrol price has been cut by Rs 2.42 per litre and diesel by Rs 2.25 a litre after an excise duty hike limited the benefit of global crude prices slumping to six-year low. A Finance Ministry notification said excise duty on unbranded petrol is being hiked to Rs 8.95 per litre and that on unbranded diesel to Rs 7.96 per litre. The four excise duty hikes will result in about Rs 20,000 crore in additional revenue this fiscal and will help the government meet its fiscal deficit target of 4.1 per cent of the GDP.

Earlier in the day, Petroleum Minister Dharmendra Pradhan responded to criticism of oil firms not cutting despite near 4 per cent fall in global rates since January 1 saying, the pricing was "not in our hands" as the two fuels have been deregulated. "What oil companies feel appropriate they will do," he said. Alongside Pradhan, B Ashok, Chairman of Indian Oil Corp, the nation's largest fuel retailer, justified the decision not to revise rates saying oil firms were saddled with huge inventory which need to be compensated.

The crude oil that is being processed currently in refineries is one that was bought about 6-8 weeks back when rates were higher than present prices. By the time, it is processed and marketed its market value would have come down, resulting in inventory losses, totalling about Rs 12,000 crore. "There is huge drop in crude prices which is having a tremendous impact on our inventories, its a cash loss. We are paying much higher price for the crude and today we are processing the crude at a much lower price and passing it. We are taking our decision based on that and we think we have been doing the right thing," Ashok said.