New Delhi: Excise duty on petrol and diesel was on Saturday hiked by Rs 3 per litre as the government looked to mop up gains arising from fall in international oil prices.
Special excise duty on petrol was hiked by Rs 2 to Rs 8 per litre incase of petrol and to Rs 4 incase of diesel, an official notification said.
Additionally, road cess on petrol was raised by Rs 1 per litre each on petrol and diesel to Rs 10.
The increase in excise duty would in normal course result in a hike in petrol and diesel prices but most of it would be adjusted against the fall in rates that would have necessitated because of slump in international oil prices.
The development comes just days after global oil prices tumbled 8 per cent on Thursday with Saudi Arabia and the United Arab Emirates flooding the market with a cheap supply.
The fallout of talks between oil giants Organization of Petroleum Exporting Countries (OPEC) and Russia had depressed the crude oil prices to about $30 a barrel recently against a high of over $70 a barrel in September and again in January this year.
For India, lower oil prices act as big incentive as the country depends on imports to meet 86 per cent of its oil requirements. Lower import bill would also have positive impact on country's fiscal deficit that had already slipped from earlier targets in the wake of higher government expenditure this year to curb falling GDP growth.
Kerala Finance Minister Thomas Issac lashed out at the Centre for its decision and said the government has lost a crucial opportunity to restrain the price hike. He said the government, without utilizing the fall of crude oil prices, is furthering burdening the people in these times of distress.
Despite the economy stumbling down to 4 per cent, the government has not considered an appropriate stimulus package, the minister pointed out.
Bloodbath in oil market
Late last week, talks between oil cartel OEPC and Russia collapsed as the two sides failed to agree on an output cut deal. This pushed Saudi Arabia, the world's largest oil producer, to cut its crude prices and announce increase production leading to a mayhem in an already over supplied oil market.
Crude is trading down 22 per cent to $32 a barrel. Brent crude, the global benchmark, has also plunged 22 per cent to $35 a barrel. Both oil contracts are on track for their worst day since 1991 Gulf War.
US oil prices crashed as much as 27 per cent to a four-year low of $30 a barrel.
The fear in the market now is that oil prices may crash further as Saudi Arabia is taking aggressive stance and is expected to flood the market with crude in a bid to recapture market share. Analysts have said that Saudi Arabia had slashed its April official selling prices by $6 to $8 a barrel in a bid to retake market share and heap pressure on Russia.
The failure of OPEC-Russia deal on production cuts has the genesis on growing prowess of the United States in oil export market. Russia has been dropping hints that the real target is the US shale oil producers as any production cuts by them helps US producers extra space in the market. OPEC led by Saudi Arabia wants production cuts to be expanded in an oversupplied market to prevent further erosion in oil prices that is also facing huge demand squeeze aggravated by the spread of Coronavirus.
The failure of talks has also resulted in a crash of Stock markets across the Gulf. Saudi Arabia's stock exchange, the Tadawul, was down 7.7 per cent in afternoon trading on Sunday. The Abu Dhabi index fell 5.8 per cent, Dubai's Financial Market General Index was down 7.47 per cent.
Shares of Saudi state oil giant Aramco traded below their original IPO price for the first time on Sunday, at 30.90 riyals ($8.24) in Riyadh compared to the listing price of 32 riyals in December. That's down 6.36 per cent on the day.
(With inputs from IANS)
