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SEP 12 2017

Finance Ministry rules out cut in excise duty on petrol, diesel

  • Economic Times, ET Bureau / Hyderabad
  • Created: Tue 12th SEP 2017


Consumers will continue to pay higher taxes on petrol and diesel as the government has no plans to lower the excise duty on fuel.

This is because notwithstanding the robust collections from the Goods and Services Tax, the Centre continues to remain vigilant about its fiscal health. “There is no proposal to lower the excise duties on petrol and diesel. We are not looking at anything of the sort at the moment,” said a senior government official.

While the dividend payment from the Reserve Bank of India at Rs. 30,659 crore is lower than estimated Rs. 58,000 crore and uncertainty over the projected Rs. 72,500 crore from disinvestment receipts, the Centre is keeping a close eye on its fiscal projections.

Global prices still low

A major source of comfort is the still low prices of crude oil in the global market. Sources said that a re-look may not take place until global crude oil prices touch at least $70 a barrel.

“Though prices have begun to increase in the international market, they are still within range and there is not too much pressure from taxes on domestic consumers,” said the official. Recently, Petroleum Minister Dharmendra Pradhan too had ruled out a cut in duties and had said it would be looked into when needed.

The international crude oil price of the Indian Basket touched $53.63 per barrel on September 8, according to data by Petroleum Planning and Analysis Cell. With global crude oil prices at a record low, the government through a series of duty hikes in late 2015 and early 2016 had hiked the excise duty on petrol and diesel to help improve its own finances.

In all, the excise duty on petrol was hiked by Rs. 11.77 per litre and on diesel by Rs. 13.47 a litre. This has helped the Centre raise about Rs. 1,00,000 crore in Central excise duties this fiscal, primarily through the higher tax on petrol and diesel, which are still outside the ambit of GST.

Analysts, in fact believe that the Centre could choose to further increase the duties if international prices remain low and meeting the fiscal deficit target remains a challenge.

Defcit challenge

“The fiscal deficit target of 3.2 per cent is a challenge. The government may either have to lower expenditure or they might even have to review the excise duty on petroleum to meet it,” said DK Srivastava, Chief Policy Advisor, EY (India).

Tax collections from GST amounted to Rs. 92,283 crore in August, although both the government and analysts believe it is too early to make a trend. “Though prices have begun to increase in the international market, they are still within range and there is not too much pressure from taxes on domestic consumers.”


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