Govt not considering cutting excise duty on petrol, diesel yet as oil rates have not spiked, says DEA secretary

The government is not considering cutting excise duty on petrol and diesel yet as rates have not touched levels that could trigger such an action, said Economic Affairs Secretary Subhash Chandra Garg.

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.

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.”

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). Every rupee cut in excise duty on petrol and diesel will result in a revenue loss of Rs 13,000 crore.

Asked if there is any thinking of cutting excise duty or asking PSU oil firms to hold rates till elections in Karnataka, he said, “We have not seen anything (on it).”

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.

The recent spurt may have been because of stock drawdowns, trade tensions and geopolitics around Syria and Korea. “I think demand-supply situation is also turning alright. I think those (geopolitical issues) are also getting out of the way. So I don’t expect prices to go up further and that’s why I said ideally it should come down,” he said.

State-owned oil firms, which have been since June last year revising auto fuel prices daily, today kept petrol and diesel rates unchanged for the sixth day in a row.

Petrol in the national capital costs Rs 74.63 a litre, the highest since September 14, 2013, when rates had hit Rs 76.06. Diesel price at Rs 65.93 is the highest ever.

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.
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