New Delhi: Buckling under pressure, the government on Wednesday cut excise duty on petrol and diesel by a record Rs 5 and Rs 10 per litre to help bring down rates down from their highest-ever levels.

The excise duty reduction is effective from November 4 when petrol price will come down from the current rate of Rs 110.04 a litre in Delhi to Rs 105.04. Diesel rate will be reduced from Rs 98.42 per litre to Rs 88.42.

“Government of India has taken a significant decision of reducing Central Excise Duty on petrol and diesel by Rs 5 and Rs 10 (pre litre) respectively from tomorrow. Prices of petrol and diesel will thus come down accordingly,” the finance ministry said in a statement.

This is the highest-ever reduction in excise duty and rolls back a part of the Rs 13 and Rs 16 per litre increase in taxes on petrol and diesel effected between March 2020 and May 2020 to avoid passing on to consumers the sharp fall in international oil prices.

That hike in excise duty had taken central taxes on petrol to their highest level of Rs 32.9 per ltire and that on diesel to Rs 31.8 a litre.

The statement said states are also being urged to commensurately reduce VAT on petrol and diesel to give relief to consumers.

The reduction follows unrelenting hike in international oil prices pushing pump rates across the country to their highest-ever levels. While petrol is above Rs 100-a-litre-mark in all major cities, diesel has crossed that level in more than one-and-a-half dozen states.

The total increase in petrol price since the May 5, 2020 decision of the government to raise excise duty to record levels now totals Rs 38.78 per litre.

Diesel rates have during this period gone up by Rs 29.03 per litre.

The relentless increase in fuel prices had been severely criticised by Opposition parties, particularly Congress which had demanded that the government reduce its excise duty.

Based on April to October consumption numbers, the loss of revenue to the government due to the excise duty cut will be Rs 8,700 crore per month. This totals to an annual impact of over Rs 1 lakh crore, industry sources said. For the remainder of the current fiscal, the impact would be Rs 43,500 crore.

The cut in excise duty will bring relief to motorists. The relief will be bigger for trucks and agri sector — the biggest users of diesel.

“The reduction in excise duty on diesel will be double that of petrol. The Indian farmers have, through their hard work, kept the economic growth momentum going even during the lockdown phase and the massive reduction in excise on diesel will come as a boost to the farmers during the upcoming Rabi season,” the statement said.

The ministry said in recent months, crude oil prices have witnessed a global upsurge. “Consequently, domestic prices of petrol and diesel had increased in recent weeks exerting inflationary pressure.”

The world, it said, has also seen shortages and increased prices of all forms of energy.

“The Government of India has made efforts to ensure that there is no energy shortage in the country and that commodities such as petrol and diesel are available adequately to meet our requirements,” it added. “To give a further fillip to the economy, the Government of India has decided to significantly reduce the excise duty on diesel and petrol.”

The reduction in excise duty will also boost consumption and keep inflation low, thus helping the poor and middle classes. The decision is expected to further spur the overall economic cycle.

Prior to the cut, the government’s collection from levy of excise duty on petroleum products had risen 33 per cent in the first six months of the current fiscal when compared to last year and was 79 per cent more than pre-COVID levels.

Data available from the Controller General of Accounts (CGA) in the Union Ministry of Finance showed excise duty collections during April-September 2021 surging to over Rs 1.71 lakh crore, from Rs 1.28 lakh crore mop-up in the same period of the previous fiscal.

Thanks to the March-May 2020 hike in excise duty rates, the collection is 79 per cent more than the Rs 95,930 crore mop-up in April-September 2019.

For the full 2020-21 fiscal, excise collections were Rs 3.89 lakh crore and Rs 2.39 lakh crore in 2019-20, the CGA data showed.

After the introduction of the Goods and Services Tax (GST) regime, excise duty is levied only on petrol, diesel, ATF and natural gas. All other goods and services are under the GST regime.

Minister of State for Petroleum and Natural Gas Rameswar Teli had in July told Parliament that the union government’s tax collections on petrol and diesel jumped by 88 per cent to Rs 3.35 lakh crore in the year to March 31, 2021 (2020-21 fiscal) from Rs 1.78 lakh crore a year back.

Excise collection in pre-pandemic 2018-19 was Rs 2.13 lakh crore.