The Oil Ministry had pushing the finance ministry for a cut in excise duty on petrol and diesel.
While the announcement was initially assumed as a measure to bring down the soaring fuel prices, it was later revealed that the cuts would only offset the brunt of the newly introduced road cess, which would be charged at Rs 8 per litre.
Branded petrol has basic excise duty of Rs 7.66 per litre which has been slashed to Rs 5.66 per litre.
"2 Rs excise on petrol and diesel is being reduced and this is being converted into cess, that is the only change we have made, practically there is no impact on the final price of petrol and diesel".
The government has excluded petrol and diesel from the ambit of GST (Goods and Service Tax).
OGRA has proposed Rs10.25 per litre, SKO Rs12.74 per litre and LDO Rs11.72 per litre on the basis of hike in prices of petroleum products in the global market. The new prices of diesel and kerosene will be Rs95.83 and Rs70.26 respectively. Petroleum products still attract state and central levies such as excise duty and VAT (Value added tax). Since previous year, the oil companies are changing petrol and diesel prices every day after the new dynamic system of fuel prices was introduced. "This proves our stand that the BJP has always been in favour of capitalists", Siddaramaiah, who also holds the finance portfolio, said. The government, however, may choose to levy an additional cess on diesel and petrol. The price of high speed diesel oil has been increased by Rs5.92 per litre as against the proposal of increase by Rs10.25 per litre.
The spike in crude prices would lead to a huge increase in the oil import bill.
"This year, oil prices went up significantly, and affected consumption, government finances and held back real economic activity".