North Block turns down diesel duty cut proposal

The finance ministry today rejected a proposal by the oil ministry for a Re 1 a litre excise duty cut on diesel.

"They (finance ministry) did not see any justification in cutting excise duty on diesel. We tried, and failed," said an oil ministry official.

Earlier today, in a pre-budget meeting, the oil ministry had sought a Re 1 a litre excise duty cut on diesel.

As the excise duty cut proposal has been rejected, any immediate reduction in auto fuel prices is ruled out, the official said. The official also said the finance ministry maintains that lowering 'diesel prices will not help curb inflation'.

The petroleum ministry has also sought zero excise duty on diesel in the Budget for 2007-08 (April-March).

Currently, excise duty on diesel is levied at 8.16% of ex-factory price, plus Rs 3.32 a litre.

The petroleum ministry feels the increase in cess on indigenous crude would help neutralise the impact of reduction in excise duty.

Government had this year raised cess on indigenous crude oil to Rs 2,500 a tonne from Rs 1,800 a tonne.