Government may cut excise duty on petrol, diesel as prices hit record high
Consumers can expect relief from rising auto fuel prices this festive season as the government may opt to cut excise duty on petrol and diesel for the first time since the outbreak of the pandemic. By doing so, the government aims to prevent rising crude oil prices from adversely affecting the retail price of these two commonly used products.
Petrol and diesel prices have already hit historic highs across the country and have risen for most days in the past one month, leaving a huge hole in the pockets of consumers.
Sources said the reduction in excise duty on petrol and diesel by Rs 2-3 per liter may be announced as a shield to check further hike in auto fuel prices. The announcement could be made ahead of Diwali to make the festivities sweeter for consumers who have borne the brunt of the hike in fuel prices with petrol price hiked by Rs 30 per liter from January 1, while diesel prices will increase by Rs. Prices have reached close to Rs 26 per litre.
A source familiar with the discussions said, “The proposal to consider duty revision on two petroleum products has been discussed afresh. Though nothing has been finalized yet, a decision can be expected soon. Is.”
If implemented, the reduction in excise duty by Rs 2 per liter on the two products would have a full-year revenue impact of over Rs 25,000 crore. Any further deduction, the annual revenue impact could exceed Rs 36,000 crore. However, since more than half of the current financial year (FY22) has already ended, the revenue foregone could be very less.
Petrol, diesel may be cheaper
For consumers, the Rs 3 cut in excise duty could translate into a major cut in retail prices of petrol and diesel as oil companies can also bear some of the burden of cutting prices. States are also being asked to consider cutting VAT on fuel prices to help bring down retail rates below Rs 100 per litre, sources said. At present, the price of petrol in Delhi is Rs 105.84 per liter while the price of diesel is Rs 94.57 per litre. Diesel prices have also crossed Rs 100 per liter in Mumbai and many other places in the country.
But benchmark Brent crude prices have now settled near a three-year high of $85 a barrel and are expected to rise further in the wake of OPEC’s already announced decision to gradually ease production cuts and increase global markets. Economic activity picks up pace as demand increases at the level. After the latest wave of the pandemic.
The Indian basket of crude oil, a derivative basket consisting of sour grades (Oman and Dubai averages) and sweet grades (Brent dated) processed at Indian refineries, has also risen steadily over the past few weeks to reach an average of $73.13. The barrel in September was $69.80 a barrel in August. This is well above the comfort level of the Finance Ministry.
Sufficient space for deduction of excise duty
Sources said the government has enough room to cut excise duty on petrol and diesel without affecting the government’s target for revenue from the tax on the two fuels, said an earlier report by ICICI Securities. 8.5 per liter can be cut. Year.
Without the duty cut, the government expects to collect over Rs 4.3 lakh crore from auto fuels – much higher than the budget estimate of Rs 3.2 lakh crore. In FY21 also, the contribution of the petroleum sector to the exchequer was over Rs 4 lakh crore. This is because the excise duty on petrol and diesel was increased by Rs 13 and Rs 16 per liter between March 2020 to May 2020 and now it is Rs 31.8 per liter on diesel and Rs 32.9 per liter on petrol.
The increase in excise duty was to offset gains from the fall in international crude oil prices to a two-decade low. In fact, a major part of the additional excise duty income was used for the Covid relief measures announced by the government. But now the thinking is that with the economy showing a boom in both direct and indirect tax revenues on a rapid revival mode, there may be some modification in the duties in the interest of the common man.
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