The government’s collection from levy of excise duty on petroleum products has risen 33% in the first six months of the current fiscal when compared with last year and is 79% more than pre-Covid levels, official data showed.
Data available from the Controller General of Accounts (CGA) in the Union Ministry of Finance showed excise duty collections during April-September 2021 surging to over ₹1.71 lakh crore, from ₹1.28 lakh crore mop-up in the same period of the previous fiscal.
Thanks to a steep hike in excise duty rates, the collection is 79% more than ₹95,930 crore mop-up in April-September 2019. In the full 2020-21 fiscal, excise collections were ₹3.89 lakh crore and in 2019-20, it was ₹2.39 lakh crore, CGA data showed.
After the introduction of the Goods and Services Tax (GST) regime, excise duty is levied only on petrol, diesel, ATF, and natural gas. Barring these products, all other goods and services are under the GST regime. Out of the ₹2.3 lakh crore excise collection in 2018-19, ₹35,874 crores was devolved to states, according to the CGA. In the previous 2017-18fiscal, ₹71,759 crore was devolution to the states out of a collection of ₹2.58 lakh crore.
The incremental collection of ₹42,931 crores in the first six months ofthe the fiscal year 2021-22 (April 2021 to March 2022) is four times the₹10,000 crore liability that the government has in the full year towards repayment of oil bonds that were issued by the previous Congress-led UPA government to subsidize fuel.
The bulk of excise duty collection is from the levy on petrol and diesel and with sales picking up with a rebounding economy, the incremental collections in the current year may be over ₹1 lakh crore when compared with the previous year, industry sources said. In all, the UPA government had issued ₹1.34 lakh crore worth of bonds(equivalent to a sovereign commitment to pay in future) to state-owned oil companies to compensate them for selling fuel such as cooking gas LPG, kerosene and diesel at rates below cost.
Of this, ₹10,000 crore is due to be repaid in the current fiscal, according to the finance ministry. First, Finance Minister Nirmala Sitharaman and then Oil Minister Hardeep Singh Puri had blamed the oil bonds for limiting fiscal space to give relief to people from fuel prices trading at all-time high levels. The bulk of the excise collections come from petrol and diesel on which the Modi government had levied record taxes last year.
Excise duty on petrol was hiked from ₹19.98 per litre to ₹32.9 last year to recoup gain arising from international oil prices plunging to a multi-year low as pandemic gulped demand. On diesel, the duty is hiked to ₹31.80.
While international prices have since recovered to $85 and demand returned, excise duty has remained at the same level. This has resulted in petrol prices soaring above ₹100-a-litre-mark in all major cities and diesel crossing that level in more than one-and-a-half dozen states. The total increase in petrol price since the May 5, 2020 decision of the government to raise excise duty to record levels now totals ₹37.38 per litre. Diesel rates have during this period gone up by ₹27.98 per litre. The government had raised excise duty on petrol and diesel to mop up gains that would have otherwise accrued to consumers from international oil prices crashing to as low as $19 per barrel.
Petrol and diesel as well as cooking gas and kerosene were sold at subsidised rates during the previous Congress-led UPA government. Instead of paying for the subsidy to bring parity between the artificially suppressed retail selling price and the cost that had soared because of international rates crossing $100 per barrel, the then government issued oil bonds totalling ₹1.34 lakh crore to the state-fuel retailers.
These oil bonds and the interest thereon are being paid now. Of the ₹1.34 lakh crore of oil bonds, only ₹3,500 crores of principal have been paid and the remaining ₹1.3 lakh crore is due for repayment between this fiscal and 2025-26, according to information made available by the finance ministry.
The government has to repay ₹10,000 crores this fiscal year (2021-22). Another ₹31,150 crore is due to be repaid in 2023-24, ₹52,860.17 crore in the following year and ₹36,913 crore in 2025-26. Minister of State for Petroleum and Natural Gas Rameswar Teli had in July told Parliament that the Union government’s tax collections on petrol and diesel jumped by 88% to ₹3.35 lakh crore in the year to March 31, 2021 (2020-21 fiscal) from ₹1.78 lakh crore a year back. Excise collection in pre-pandemic 2018-19 was ₹2.13 lakh crore.
