The move, which comes amid declining prices of crude oil in the international market, will boost government revenue and help it contain the fiscal deficit.
The revised excise duty on petrol and diesel came into affect from Tuesday, official sources said.
The move will have no impact on retail prices of petrol and diesel, they said.
This is the second hike in excise duty in three weeks. On November 12 the government had raised the excise duty by Rs 1.50 per litre on both petrol and diesel but that did not have any impact on the retail prices.
In view of the declining prices of crude, oil marketing companies had on Monday cut petrol price by 91 paise a litre, the seventh reduction since August, and diesel by 84 paise per litre, the third straight cut.
The hike in excise duty is expected to yield an additional Rs 4,000 core in the remaining part of the current fiscal. The addition from the earlier increase is expected to be Rs 6,000 crore.
The international crude oil price of Indian Basket as computed by Petroleum Planning and Analysis Cell (PPAC) was USD 67.72 (Rs 4,208.12) per barrel (bbl) yesterday, down from USD 70.29 per bbl on November 28.
The hike in excise duty will help government mop taxes as it was facing challenges on the indirect tax front on account of slowdown in economic activities.
Petrol price cut by 91 paise a litre, diesel by 84 paise