Crime Today News
The government’s penchant for increasing excise duty during times of low global crude oil prices has been in practice since 2014, a mechanism that has been utilised more than a dozen times to shore up revenues.
A back of the envelope calculation shows that between 2014 and 2025, the excise duty was revised around 16 times, of which rates were increased on about 13 occasions, while they were cut thrice.
The highest number of revisions took place between 2014 and 2016, when the duty was revised upwards by nine times, while rates were slashed once.
The government earned around ₹20,000 crore in FY15 and roughly ₹16,500 crore in FY16 from the revision.
Duty strategy
Centre’s excise duty on petrol and diesel has four components — BED, Special Additional Excise Duty (SAED), Agriculture Infrastructure and Development Cess (AIDC) and Road and Infrastructure Cess or Additional Excise Duty.
While part of money collected through BED goes to divisible pools, which is distributed among states, money mopped-up through the other three goes to the Centre’s kitty.
On several instances, the government emphasised that revising excise duty rates is to generate finances for infrastructure and other developmental works.
For instance, On December 6, 2021, a query was raised in Lok Sabha on government earning around ₹36,000 crore through excise duty revisions in the previous 7 years.
Minister of State for Finance Pankaj Chaudhary said: “Excise duty rates on petrol and diesel have been calibrated to generate resources for infrastructure and other developmental items of expenditure keeping in view the prevalent fiscal situation.”
In the last 6-7 years, the government has been revising the rates of SAED, AED, etc, the proceeds of which entirely rest with the Centre. Monday’s upward revision in SAED is likely to boost Centre’s kitty by around ₹32,000 crore.
Besides, the ₹50 per cylinder increase in LPG rates is likely to garner around ₹5,000-7,000 crore for the OMCs.
To fund LPGs
Oil Ministry said the proceeds will be utilised to reduce losses of PSU OMCs, who are providing LPG at affordable rates despite high Saudi CP prices that surged 63 per cent between July 2023 and February 2025.
However, Oil Ministry expects to compensate OMCs in FY26, which are saddled with losses of ₹41,383 crore as of FY25.
In 2022, the government gave ₹22,000 crore to PSU OMCs as a one time grant for losses in supply LPG at below market rates against losses of ₹28,000 crore.
Under FY26 Budget, the Centre expects to collect ₹3.17 lakh crore through excise duties.
Out of which, over ₹39,000 crore will come through BED, while over ₹1.44 lakh crore, ₹47,000 crore and ₹57,000 crore are to be collected through SAED, AIDC and Road & Infrastructure Cess, respectively.
Since the introduction of GST, almost the entire Union excise duty is collected through crude oil and petroleum products, the collections can be attributed to crude, petrol, diesel as well as other petroleum products.
Besides, it will also help to compensate for loss of excise duty income in FY25. Budget estimate of excise duty collection was ₹1.22 lakh crore, while the revised estimate was ₹1.15 lakh crore.
Published on April 8, 2025
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