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The rise in cap will allow the government to increase the excise duty which may or may not increase the retail prices of petrol and diesel but will definitely minimise the benefits that the common man could have got, given the freefall in crude oil prices in the global market. The Finance Ministry has decided to make some amendments to the Finance Bill 2020, wherein the government will be raising special additional excise duty on petrol and diesel by up to ₹ 8 per litre.

The increase in excise duty would, in normal course, result in a hike in petrol and diesel prices. Last year's Finance Act had put the cap at Rs 10 per litre for petrol and Rs 4 per litre for diesel.

Notably, the ₹ 8 per litre hike would be a great move for the government as it would increase its annual excise collection from the sector to ₹ 1,20,000 crore. But there is expected to be a demand slowdown for fuels with a almost country wide lockdown in the wake of coronavirus.

On March 14, the government had raised excise duty on petrol and diesel by Rs 3 per litre, the highest in the five years, taking advantage of the low global oil prices to boost its coffers. An additional Re 1 per litre was also levied on both petrol and diesel under the road and infrastructure cess (RIC).

In February, the consumer price inflation has fallen to 6.58 per cent but this could begin to rise again if petrol and diesel prices are raised. With Rs 8 per litre increase these would increase substantially to Rs 30.98 per litre on petrol and Rs 26.83 on diesel. The amendment gives powers to the government to raise the duty by up to Rs 8 per litre in petrol and diesel at any time it wishes.

The Congress on Monday accused Prime Minister Narendra Modi and his government of "shamefully" taking advantage of people's misery and profiteering from the crash in global crude oil prices.

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