The central government earned Rs 2.73 trillion in form of excise duty from the petroleum sector in the financial year 2024, a drop of 4.8 per cent from the previous year when it had netted Rs 2.87 trillion. In fact, FY24 was the fourth straight year when the excise duty collection has seen a drop.
When asked about the reason, a senior government official attributed the fall in excise duty in FY24 to reduced windfall tax gains.
“The average impact of the windfall tax in 2023-24 has been lower than the previous year as global crude rates have been relatively less volatile. This is the reason, the total excise collections have reduced,” the official said.
Excise duties on petrol and diesel were last revised in May, 2022.
On the other hand, fuel consumption in India, a proxy for oil demand, increased 4.6 per cent to hit a record high of 233.32 million tonne (mt) in FY24, data from the Petroleum and Natural Gas Ministry shows.
The data was submitted to Parliament earlier this month.
Excise duty is levied by the Centre on the domestic sale of petrol and diesel. Currently, it is Rs 19.90 per litre for petrol and Rs 15.80 per litre of diesel. On top of this, the state governments levy VAT, sales tax and other additional charges.
Classified as the Special Additional Excise Duty (SAED), windfall tax is levied on domestically produced crude oil, and export of diesel, petrol, and jet fuel (ATF). The tax rates are reviewed every fortnight based on average oil prices in the previous two weeks.
As on August 1, the windfall tax on domestically produced crude oil was reduced to Rs 4,600 per tonne from the previous Rs 7,000 per tonne, while it continued to be nil for the exports.
Total tax mop-up
However, the petroleum sector’s total contribution to the exchequer rose in FY24, albeit by a marginal 0.38 per cent to Rs 7.51 trillion, up from Rs 7.48 trillion in FY23.
It had shrunk by 3.4 percent in FY23.
Within this, its contribution to the central government through taxes shrank to Rs 3.5 trillion from Rs 3.7 trillion in the year before. Meanwhile, the sector’s contribution in the form of dividends rose to Rs 82,308 crore, up from Rs 57,741 crore.
India imported more than 87.7 per cent of its crude oil requirements in 2023-24.
The prices of petrol and diesel in the country are linked to their respective prices in the international market.
Note: All figures in Rs Crore
Source: Petroleum and Natural Gas Ministry
First Published: Aug 16 2024 | 7:30 P.M IS