UPDATE 1-India increases fuel taxes in a bid to shore up revenue

Sudarshan Varadhan and Aftab Ahmed

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NEW DELHI, March 14 (Reuters) - India on Saturday increased 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 six years.

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

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.

India stopped controlling petrol prices in 2010 and diesel prices in 2014, linking them to global crude markets in a bid to ease pressure on government finances and improve the earnings of oil refiners.

Global oil prices posted their biggest week of losses since the 2008 global financial crisis, rocked by the coronavirus outbreak and efforts by top exporter Saudi Arabia and its allies to flood the market with record levels of supply.

The aggressive turnaround by Saudi Arabia, India's top oil supplier, comes after Russia, the world's second-largest producer, balked on Friday at output cuts proposed by OPEC producers to stabilize falling prices caused by the economic fallout from the virus outbreak.

The national hike translates to a 4.8% increase in diesel prices, and a 4.3% hike in petrol prices in India's capital New Delhi, compared with Friday's prices. Fuel prices are not uniform across the country due to variable state taxes.

Petrol was sold at 70 rupees a liter, while diesel was sold at 62.74 a liter on March 13, according to state-run retailer Indian Oil Corp's website.

($1 = 73.8390 Indian rupees) (Reporting by Sudarshan Varadhan and Aftab Ahmed; Editing by Michael Perry)

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