Budget 2025: CII calls for excise duty cut for petrol and diesel

Industry body CII in its budget suggestions for 2025-2026 has recommended lowering the excise duty on petrol and diesel. The industry body has argued in its suggestion that the high fuel prices significantly drive inflation. While the suggestion is aimed at providing relief to a greater number of people and the economy, this would also help the motorists in India who have been reeling under pressure from sky-high fuel prices over the last few years.

Currently, petrol and diesel costs are at a high level across India. While the prices of petrol and diesel went further up, after a slight reduction several months back, petrol now costs above ₹100 per litre in many cities and states across India, while a litre of diesel too costs near ₹100 mark. One of the key reasons behind such a high price for petrol and diesel in India is the high rate of central excise duty slapped on these motor fuels, which takes the retail price up owing to the total tax incidence. CII has recommended a reduction in the tax rate for the motor fuels, reported PTI.

The central excise duty alone accounts for approximately 21 per cent of the retail price of petrol. On the other hand, the central excise duty accounts for 18 per cent of diesel's retail price. The central excise duty for petrol and diesel has not been adjusted in line with the global crude oil prices since May 2022. Interestingly, during this period, price of the global crude oil has been reduced by approximately 40 per cent. However, as the oil marketing companies in India have not lowered the retail prices of petrol and diesel in the country in line with the global crude oil prices, the consumers have been deprived of the benefits.

The high retail prices of petrol and diesel prices are not only because of the high rate of central excise duty but due to the value-added tax (VAT) imposed by the state governments as well. In fact, this is the reason behind the variable prices in different states for these two motor fuels across the country. It has been recommended by various segments of the automotive industry several times that petrol and diesel be brought under the GST regime to bring uniformity. However, the government is yet to make any such move.

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