Budget 2020

Fuel price to go up, thanks to Budget

Twesh Mishra New Delhi | Updated on July 05, 2019 Published on July 05, 2019

Both petrol and diesel prices will go up   -  The Hindu

Consumers will feel the pinch as petrol and diesel prices are being hiked by up to ₹2.70 a litre from midnight.

This follows the Budget 2019-2020 move to hike special additional excise duty as well as road and infrastructure cess by a rupee each per litre on both products.

Finance Minister Nirmala Sitharaman has decided to take advantage of the softening crude prices. I propose to increase Special Additional Excise duty and Road and Infrastructure Cess each by one rupee a litre on petrol and diesel,” she said in her Budget speech.

She also said that the petroleum crude duty is proposed to be hiked from nil to ₹1 a tonne.

“The hike in central levies is ₹2 a litre on petrol and diesel, but the retail price of auto fuels also has the cost of State government levies built in. These state levies such as Value Added Tax are charged ad-valorem above the final price charged by oil companies which is inclusive of the central levies. This will push up the final price by around ₹2.30 to ₹2.70 a litre on both petrol and diesel across the country,” a former Director (Finance) at an Oil Marketing Company told BusinessLine.

“The government is expected to shore up around ₹30,000 crore from the increase in Additional Excise duty and Road and Infrastructure Cess. A higher duty on products also means that the government expects crude oil prices to remain range-bound despite the geopolitical uncertainties and OPEC’s intentions on further production cuts,” Debasish Mishra, Partner at Deloitte India said.

Charting the way ahead for the energy sector, Sitharaman said that “By 2022, the 75th year of India’s Independence, I would like to assure the nation that every single rural family, except those who are unwilling to take the connection, will have electricity and a clean cooking facility,” she said.

The subsidy on LPG under the Direct Benefit Transfer programme has been pegged at ₹29,500 crore for fiscal 2019-2020.

The Centre incurred an expenditure of ₹16,477.80 crore on account of LPG subsidy in fiscal 2018-2019.

Sitharaman also said that the recommendations of the High Level Empowered Committee on retirement of old and inefficient power plants and addressing low utilisation of gas plant capacity due to paucity of natural gas will be taken up for implementation now.

According to Mishra, this announcement augurs well for all stakeholders and might work, given the prevailing low spot LNG prices, willingness of developers and lenders to take haircuts.

Power distribution

The Finance Minister said that the government is examining the performance of the Ujjwal Discom Assurance Yojna (the power distribution company revival scheme) and that it will be further improved.

“The distribution reforms of the power sector will be channelled through the Tariff Policy. We hope to firm up the draft Tariff Policy in a week,” Minister of State (Independent Charge) for Power and Renewable Energy, R K Singh said.

Sambitosh Mohapatra, Partner and Leader Energy & Utilities, PwC India, feels the move to address tariff-related issues reflects a resolve to provide choice to customer.

The Finance Minister also announced sops for setting up mega-manufacturing plants of semi-conductor fabrication, solar photo voltaic cells, lithium storage batteries, and solar electric charging infrastructure among others.

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Published on July 05, 2019
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