Industry sources said the reduction in rates would have been higher but for the Rs 3 per litre increase in excise duty effected on Saturday.
Oil companies, they said, had been moderating reduction warranted in retail prices in anticipation of an excise duty hike.
The gains they thus accumulated were adjusted against the price hike that would have been necessary because of the increase in excise duty. Some moderation in passing on the decline in international prices in the near future to domestic consumers will continue till all of the excise duty impact is recovered, the sources added.
The government had on Saturday hiked excise duty on petrol and diesel by a steep Rs 3 per litre each to garner about Rs 39,000 crore additional revenue as it repeated its 2014-15 act of not passing on gains arising from the slump in international oil prices.
According to a notification issued by the Central Board of Indirect Taxes & Customs, special excise duty on petrol was hiked by Rs 2 to Rs 8 per litre and to Rs 4 a litre from Rs 2 in case of diesel.
Additionally, road cess was raised by Re 1 per litre each on petrol and diesel to Rs 10.
With this, the total incidence of excise duty on petrol has risen to Rs 22.98 per litre and that on diesel to Rs 18.83.
The tax on petrol was Rs 9.48 per litre when the Modi government took office in 2014 and that on diesel was Rs 3.56 a litre.
The government had between November 2014 and January 2016 raised excise duty on petrol and diesel on nine occasions to take away gains arising from plummeting global oil prices.
In all, duty on petrol rate was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months that helped government's excise mop up more than double to Rs 2,42,000 crore in 2016-17 from Rs 99,000 crore in 2014-15.
It cut excise duty by Rs 2 in October 2017 and by Rs 1.50 a year later. But it raised excise duty by Rs 2 per litre in July 2019.
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