Petrol and Diesel excise duty may be cut Rs 2-4/litre; PMO to take final call

Petroleum Minister Dharmendra Pradhan is expected to meet oil-marketing companies on Wednesday to take stock of the situation

 

Latest News : The Prime Minister’s Office (PMO) will take a final call on a cut in the excise duty on petrol and diesel, according to senior officials, with surging fuel prices creating ripples among consumers and politicians alike. The cut is likely to be in the range of Rs 2 to Rs 4 a litre, they added.

Petrol and diesel prices touched new highs of Rs 76.87 and Rs 68.08 a litre, respectively, in Delhi on Tuesday. In the Mumbai market, prices of petrol at Rs 84.70 a litre and diesel at Rs 72.48 were the highest ever.

Petroleum Minister Dharmendra Pradhan is expected to meet oil-marketing companies on Wednesday to take stock of the situation. It is likely that the government may ask Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) to freeze prices as a temporary arrangement.

“The PMO has been provided data and inputs from OMCs. For the last one week, discussions have been going on regarding an excise duty cut, and a decision is imminent,” said a finance ministry official.

Talks are also on to reimburse the dealers their commission. When the global oil prices were down, the government had hiked the excise duty on fuel nine times, between November 2014 and January 2016, but reduced it only once, in October last year.

Finance Ministry officials said Rs 130-140 billion in losses per Rs 1 cut in excise duty on petrol and diesel was expected. “A duty cut of Rs 2 will amount to Rs 260-280 billion in losses. At a cut of Rs 4 a litre, the hit could be as high as Rs 520-560 billion,” an official said.

The Centre’s budgeted estimate in revenues from petrol and diesel duties was Rs 2.43 trillion for 2018-19.A hit to revenue collections due to an excise duty cut could impact the fiscal situation this year, which has come under pressure just two months into 2018-19 because of high crude oil prices. The total fiscal deficit target for the year is Rs 6.24 trillion or 3.3 per cent of gross domestic product. Assuming all other factors, sources of revenue, and expenditure commitments remain constant, a maximum hit of Rs 560 billion could lead to a fiscal deficit of Rs 6.80 trillion, or 3.6 per cent of the 2018-19 nominal GDP projection of Rs 187.2 trillion.

Another option before the government is to convince the states on bringing petrol and diesel under the GST regime. A decision on this rests with the GST Council. “We are following international prices based on an average of the last 15 days.

We believe all petroleum products should come under the goods and services tax (GST),” said Sanjiv Singh, chairman of IOC. If prices sustain within the $60-80 a barrel mark, fuel subsidy for the financial year may exceed the budgeted Rs 250 billion. The Indian basket crude oil price was $77.04 a barrel on Tuesday. On the other hand, the Brent crude price was seen at $79.62 a barrel at one point.

Read More on → Fuel Prices in India

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