India raises fuel taxes in attempts to shore up revenue

New Delhi

India has risen up taxes on petrol and diesel in a desperate attempt to increase government revenue at a time when tax collections have fallen amid the weakest economic growth in the past six years.

The excise duties on the fuels, which have been hiked by Rs. 3 per liter, is expected to result in up to 400 billion Indian rupees ($5.42 billion) increase in revenue, said a senior government official.

Taxes on petrol and diesel, which account for more than a third of retail fuel prices, are one of the biggest sources of income for Prime Minister Narendra Modi’s government, which has more than tripled revenue from taxes on fuel since first coming to power in 2014.
Indian opposition parties have criticized the Modi government for their high fuel tax policy amid a decline in rural consumption, but economists have praised the move as fiscally prudent.

“This balance by the government is a good strategy. This also helps the state shore up some revenue for other useful expenditures,” said N. R. Bhanumurthy, economist at the government-backed National Institute of Public Finance and Policy in New Delhi.