Govt not considering excise duty cut, expecting that oil prices would ease

Last week, a finance ministry official said that a reduction in excise duty is not advisable if the government is to stick to the path of reducing budgetary deficit.

Despite the petrol price touching a 55-month high and diesel rate hitting an all-time high, the government is not considering cutting excise duty on petrol and diesel. Economic Affairs Secretary Subhash Chandra Garg has said that rates have not touched levels that could trigger such an action.

In an interview to PTI, Garg said oil prices can impact the government's fiscal maths if they result in a spike in rates of domestic cooking gas (LPG) - the only commodity that is subsidised now.

"Otherwise there is no direct subsidy any longer," he said.

"Indirect subsidy/impact comes, if crude oil prices reach a certain level (and) there might by some rethink about excise duty etc. That's not happened so far," he added.

Without indicating the level of oil prices that could trigger an excise duty cut, he said, "If the level (of prices now) does not go up, there is no reason (for excise duty cut)."

The price of petrol was on April 21 hiked by 13 paise per litre while that of diesel was raised by 15 paise per litre. As of Saturday, the cost of petrol was Rs 74.21 a litre and that of diesel diesel was Rs 65.46 per litre in Delhi. State oil firms have not revised petrol and diesel price for almost a week now. This after petrol price hit a 55-month high of Rs 74.63 a litre and diesel rates climbed to a record high of Rs 65.93.

Last week, a finance ministry official said that a reduction in excise duty, which makes up for a quarter of retail fuel price, is not advisable if the government is to stick to the path of reducing budgetary deficit.

"Excise duty cut would be a political call, but is not advisable if we have to stick to the fiscal deficit glide path outlined in Budget," a PTI report quoted a ministry official as saying.

The government is targeting reducing fiscal deficit to 3.3 per cent of the gross domestic product (GDP) in the current fiscal, from 3.5 per cent last fiscal.

The central government levies Rs 19.48 a litre of excise duty on petrol and Rs 15.33 per litre on diesel. State sales tax or VAT vary from state to state. In Delhi, VAT on petrol is Rs 15.84 and Rs 9.68 a litre on diesel.

The government is hoping that geopolitical tensions would ease and US shale oil would help ease oil prices that are near three-year high.

"Fundamental reasons, to my mind, don't exist for oil prices to go up further from both demand and supply situation," Garg said.

India has the highest retail prices of petrol and diesel among South Asian nations as taxes account for half of the pump rates. The government had raised excise duty nine times between November 2014 and January 2016 to shore up finances as global oil prices fell, but then cut the tax just once in October last year by Rs 2 a litre.

Subsequent to that excise duty reduction, the Centre had asked states to also lower VAT, but just four of them - Maharashtra, Gujarat, Madhya Pradesh and Himachal Pradesh - reduced rates while others including BJP-ruled ones ignored the call. In all, duty on petrol rate was hiked by Rs 11.77 per litre and that on diesel by 13.47 a litre in those 15 months that helped government's excise mop up more than double to Rs 2,42,000 crore in 2016-17 from Rs 99,000 crore in 2014-15.

OneIndia News with PTI inputs