Government bears full cost of excise duty cut on petrol, diesel: FM Nirmala Sitharaman

New Delhi: Union Finance Minister Nirmala Sitharaman on Sunday clarified that the entire cost of the reduction in excise duty on petrol and diesel is borne by the central government and the state`s revenue won`t be impacted by the move. 

In a tweet, the finance minister noted "Basic Excise Duty (BED), Special Additional Excise duty (SAED), Road & Infrastructure Cess (RIC) and Agriculture & Infrastructure Development Cess (AIDC) together constitute Excise Duty on petrol and diesel."

The Basic Excise Duty is sharable with states. Special Additional Excise Duty, Road & Infrastructure Cess, and Agriculture & Infrastructure Development Cess are non-sharable.On Saturday, the finance minister announced excise duty cut of Rs 8 per litre on petrol and Rs 6 a litre on diesel. This reduction is in the Special Additional Excise Duty. 

This is no-sharable. So the entire burden is borne by the central government. In November 2021, Prime Minister Narendra Modi government had cut excise duty on petrol by Rs 5 per litre and diesel by Rs 10 per litre.The duty cut in November 2021 was from the Road & Infrastructure Cess (RIC) category.According to the finance minister, the entire cost of these two reductions in excise duties on petrol and diesel is borne by the central government.

"Basic ED which is sharable with states has not been touched. Therefore, the entire burden of these two duty cuts (made in Nov, 21 and yesterday) is borne by the Centre," Sitharaman said. The duty reduction made on Saturday has an implication of Rs 1,00,000 crore a year for Centre. 

The duty reduction made in November 2021 has an implication of Rs 1,20,000 crore a year for Centre. Total revenue implication to Centre, on these two duty cuts is thus Rs 2,20,000 crore a year, the finance minister said.