Excise on petrol, diesel cut by Rs 2/L; Govt may suffer Rs 26,000 cr loss

This comes at a time when diesel in Delhi scaled an all-time high of Rs 59.14 per litre

 

 

Facing public resentment over the recent spike in fuel prices, the government on Tuesday cut the excise duty on both branded and unbranded petrol and diesel by Rs 2 a litre from Wednesday. According to sources, the finance ministry was initially reluctant to reduce the duty due to revenue concerns, but relented after discussions with the petroleum ministry on implementing steps to bring down petrol prices to Rs 60-65 a litre.

While this would hit the revenues of the exchequer by Rs 13,000 crore in the second half of the current financial year at a time when the fiscal deficit has already touched 96 per cent of the Budget Estimates, consumers will get relief as the move would reduce the consumer price index (CPI)-based inflation rate by 9 basis points as a first round impact.

“(The) government has reduced the basic excise duty on petrol and diesel (both branded and unbranded) by Rs 2 a litre with effect from October 4, 2017. The revenue loss on account of these reductions will be about Rs 26,000 crore in a full year and Rs 13,000 crore in the remaining part of the current financial year,” the finance ministry announced on Twitter.

This comes at a time when diesel in Delhi scaled an all-time high of Rs 59.14 a litre, while other cities, too, saw a considerable increase in prices. The petrol price in Delhi was at a two-year high of Rs 70.88 a litre on Tuesday. Currently, taxes constitute the excise duty of Rs 21.48 a litre, 30 per cent of the price of petrol, and Rs 17.33 a litre, 29 per cent, of the price of diesel.

Devendra Pant, chief economist at India Ratings, said the move would reduce the CPI inflation rate by around nine basis points, with petrol accounting for eight basis points and diesel one basis point. The CPI inflation rate rose to 3.36 per cent in August from 2.36 per cent in July.

While the revenue loss from the excise cut for the remainder of FY18 was not very large, it would exacerbate the concerns posed by other fiscal risks, such as the decline in the surplus transferred by the RBI and the possibility of shortfalls in inflows from disinvestment, etc,.... Read Full Story

Gulf-Qatar rift: What it means for India and the global oil market

Indian market is one where all oil producers would want to be involved, and especially Saudi Arabia

 

 

Business News - To get a sense of some of the developments about Qatar look at this piece of statistic plus a bit of news. According to the US Energy Information Administration, production of shale oil in USA is expected to reach 5.4 million barrels a day in June, its highest level in more than a year. The recovery outpaces estimates for every most month since August last year. The piece of news is the fast expanding relationship of Qatar with India.

Shale has put American capital and labour to work, a huge domestic political dividend, after price of crude oil from Opec nations soared past $49 a barrel since the 14-member countries agreed since November 2016 on a production cut. In this environment, the US juice can begin to sell at about $47 a barrel, given its lower quality but enough to bring more and more of its onshore fields into production. 

It is vital for the the Trump administration to ensure that Opec keeps its production capped. Opec can keep it capped if Iran does not open the tap of its vast reservoir too much and that means both USA and Saudi Arabia should be on the same side of the field. The Saudis can ensure their diktat runs with two of the large oil producers—UAE and Kuwait, both of whose royal families are blood relations of Riyadh. But Qatar isn’t, even though its royal family too hails from the same desert. 

And Qatar’s rise is linked to its suddenly deepening relationship with India. There are reasons for it. The first of those is natural gas which Qatar like Iran has plenty of but Saudi Arabia doesn't have much of. And countries like India wanting to use their growing economic clout want the gas to flow. There are no Opec-like restrictions on gas prices and it is cheaper. So, if Qatar plays around with its gas reserves and along with Iran dominating its market, there are enough reasons to make the Saudis worried about their politico-economic hegemony getting cut and the USA worried about its domestic recovery.

 

Qatar in the past three years has become almost a strategic ally for India. The Qatar government has offered to fill up India’s strategic reserves for free in exchange for buying its natural gas and easier access for Doha’s capital into the Indian economy. One of those is the one its kind permission given to Qatar Airways to fly as a domestic airline in India.

(read more...)