Government mops up Rs 40,000 crore via excise duty on petrol, diesel within first 2 months of FY21

The government has collected about Rs 40,000 crore from excise duty on petrol and diesel in the first two months of the fiscal, or about 16 percent of its full-year target.

The exchequer’s collection rose three times in May, when the government mopped up Rs 29,396 crore (vs Rs 10,560 crore in April) following a steep excise duty hike and as demand rebounded with ease in lockdown restrictions. (On May 5, the government hiked excise duty by Rs 10 per litre on petrol and Rs 13 per litre on diesel.)

The government expects to mop up Rs 2.48 lakh crore in excise duty on petroleum products.Fuel consumption levels have reached 90 percent level compared to pre-COVID levels as economic activity restarts.

Following an 82-day pause during the lockdown, fuel retailers started increasing prices every day beginning June 7 to match the international fuel prices. This means that the hike is a win-win for states as well as state VAT on petrol and diesel is levied on an ‘ad valorem’ basis, that is as a percentage of the price.

As of June 16, excise duties and state VAT on fuel retail prices accounted for over 65 percent of the retail price.