The finance ministry has turned down the petroleum ministry’s proposal to reduce the excise duty on branded diesel, which is almost Rs. 7 a litre costlier than unbranded or normal diesel.

At present, normal diesel (in Delhi) is being sold at Rs. 58.97 a litre. Sales of branded diesel are almost nil due to the price difference. Oil companies through the petroleum ministry had sought a reduction in excise duty to narrow down the price difference.

Branded fuels (petrol and diesel) are regular fuels mixed with additives in order to increase the performance of vehicles.

In order to push the sales of branded petrol, finance minister Arun Jaitley had reduced the excise duty levied on them from Rs. 7.50 a litre to Rs. 2.50 a litre in the budget. However, branded diesel was left untouched as the government was subsidising diesel at that time.

“The proposal to cut the excise duty on branded diesel was taken up in August but has been turned down by the finance ministry in its September 11 letter,” revealed a petroleum ministry official.

The official added that the finance ministry is of the view that the request for reduction in excise duty on branded diesel cannot be acceded to as the high difference in the price is not only due to excise duty but other factors such as high basic price, dealer’s margin etc.

According to the finance ministry, excise duty contributes only Rs. 2.29 per litre to the price difference while other factors are contributing as much as Rs. 4.82 a litre. “Any reduction in excise duty at this stage would not have significant impact on sales,” stated the letter.