The decision will bring LPG prices in-line with ordinary petrol, which, among other things, will force up cab fares across the country. The plan will be implemented over nine years to allow for adjustment by industry. The government said the exemption cost around $600 million in foregone revenue last year.
LPG wasn't the only fuel to feel the pinch with other fuels such as LNG, compressed natural gas and biodiesel also becoming excisable from July 1, 2008.
The final rates to apply to all fuels will be announced later this year, but Mr Costello said it would be lower than the current rate of 38.143 cents per litre. The program for all fuels will be phased in over five years from 2008-2012.
Ethanol producers were the only happy group after receiving a five-year extension of its excise exemption, which was due to expire in September.
Mr Costello said the reforms were designed to establish a fairer and more transparent fuel excise system with improved competitive neutrality between fuels.
