Case 43 · Public money

Fuel excise. The crude crash the consumer never saw

Duty peak 06 May 2020

Cut from the states' share

2,292 days since Recorded outcome: Cut from the states' share.

Human cost

Every household buying fuel through the pandemic, and every state whose share shrank as the levy moved into cesses it does not receive

Financial cost

₹24.85 lakh cr of central excise from petroleum, 2014-15 to 2023-24. Duty on petrol went from ₹9.48 to ₹32.98 a litre, diesel from ₹3.56 to ₹31.83. Of ₹27.90 on petrol in 2022, only ₹1.40 was shareable with states

What happened

The government told Parliament it raised excise duty on ten occasions between November 2014 and January 2016 'to take away gains arising from a fall in international oil prices', and again by ₹13 a litre on petrol and ₹16 on diesel between March and May 2020 'when international oil prices came crashing after the onset of the pandemic'. Duty peaked at ₹32.98 on petrol on 6 May 2020. Excise from the petroleum sector jumped from ₹2.23 lakh crore in 2019-20 to ₹3.73 lakh crore in 2020-21.

Claim against record

What the government said

The government's position is that excise is a legitimate policy instrument calibrated as required, that it cut duty by ₹13 a litre on petrol and ₹16 on diesel across November 2021 and May 2022 and passed the relief fully to consumers, that state finances were unaffected because the cuts came from a cess states never received, and that large subsidy outlays must be set against the revenue. On the accounting, it argued the transfer followed the redesignation of the Central Road Fund and had precedent.

What the record shows

Cut from the states' share

Almost none of it is shared. The Finance Minister confirmed in 2022 that of ₹27.90 a litre of central tax on petrol, only ₹1.40 was basic excise duty shareable with states, and that both the November 2021 and May 2022 cuts were made entirely in the non-shareable Road and Infrastructure Cess. The CAG has repeatedly found the cess money is not reaching the funds it was levied for: ₹10,157 crore of Road and Infrastructure Cess in 2018-19 'was neither transferred to the related Reserve Fund nor utilised for the purpose for which the cess was collected', and a separate ₹10,250 crore was moved out by a journal entry after the year closed, which the CAG said was done 'primarily for the purpose of artificially inflating revenue receipts of the year', had 'the effect of understating deficit', put money to purposes 'contrary to the will of the Parliament', and merited investigation of the officials who authorised it. The Ministry's defence was called untenable.

Contested / alleged

The CAG's language is 'not transferred' and 'short-credited', not diverted or misappropriated. The CAG also notes cess shortfalls date back to levies imposed in 1974 and therefore span multiple governments. Calling the 2020 increases a windfall is fair comment on figures the government itself gave Parliament; calling it profiteering is opinion.

What accountability should have looked like

Cess proceeds credited to the funds they were raised for, an honest split between shareable duty and cess, and duty that falls when crude falls.

Ministers and office-holders responsible

Set duty and cess structure; CAG defence on cess accounting held untenableMinistry of Finance
Union Finance Minister; confirmed cuts were made in the non-shareable cessNirmala Sitharaman

Naming who held the portfolio is a matter of public record. It is not by itself a finding of personal responsibility for any death or any rupee.

Sources

T1 primary record · T2 reporting · T3 partisan

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Cite or export this case

Citizens' Accountability Ledger, "Fuel excise. The crude crash the consumer never saw" (Duty peak 06 May 2020), case-56. https://whoisresponsible.xyz/case/case-56/

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