₹ 4 cess on per litre of diesel and ₹ 2.5 on petrol. What is the impact

In the Union Budget 2021, the government have proposed an agriculture infrastructure and development cess (AIDC) of Rs 2.5 per litre on petrol and Rs 4 per litre on diesel. The excise duty on the two fuels has been reduced to the same extent so that the consumer doesn't feel the changes.

To make up for the cess, basic excise duty on petrol has been revised to Rs 1.4 per litre from Rs 2.98 per litre and on diesel from Rs 4.83 per litre to Rs 1.8 per litre. Further, special excise duty has been brought down by Rs 1 per litre each on the two fuels to Rs 11 per litre on petrol and Rs 8 per litre on diesel.

The government must have considered the fact that the prices of petrol and diesel are at all-time highs with taxes accounting for 57-62 per cent of the cost. Since the last budget, excise duty on petrol and diesel have gone up by Rs 13-16 per litre. 

The agriculture infrastructure and development cess (AIDC) introduced in the Union Budget 2021 -22 is meant to find the capital for the development of the agriculture infrastructure in the country. 

"There is an immediate need to improve agricultural infrastructure so that we produce more, while also conserving and processing agricultural output efficiently. This will ensure enhanced remuneration for our farmers," Finance Minister Nirmala Sitharaman said during her budget speech. "To earmark resources for this purpose, I propose an Agriculture Infrastructure and Development Cess (AIDC) on a small number of items. However, while applying this cess, we have taken care not to put an additional burden on consumers on most items.