Economy

FinMin not looking at excise duty revision on petrol, diesel

| Updated on: Apr 17, 2016

Pins hopes on buoyant tax revenue to offset hike in global price

Despite recent hardening of global crude oil prices, the government is unlikely to review the excise duty on petrol and diesel anytime soon.

Taking advantage of low crude oil prices, the government has increased almost 10 times excise duty on these two products since November 2014. Currently, the excise duty component on the actual retail price of petrol is around 35 per cent and on diesel is around 36 per cent.

The excise duty mop-up, estimated at ₹2.84 lakh crore in fiscal 2015-16 came largely from the additional levy on fuel. “As of now, there is no need. More importantly, it is a political call that will be taken at the top,” said a senior government official, adding that the taxes may be lowered in phases if oil prices near $50 a barrel.

Global crude oil prices that fell to $29 per barrel in January are now up at nearly $40 a barrel. The price at which Indian refiners sourced their crude oil rose to $40.60 per barrel by April 12 from as low as $26.95 per barrel on February 11 when the Union Budget was being prepared.

Most analysts expect oil prices to remain between $40-$50 per barrel in 2016 and harden further from 2017. A further indication of oil price movement will be available after the Doha talks between oil producers on a possible freeze in crude production.

No concerns

In fact, the Finance Ministry is unfazed by the recent hardening of global crude oil prices and is confident of keeping its Budget calculations intact. The optimism is based on an expectation of improved economic growth that will boost tax revenues over the projected estimate of ₹16.3 lakh crore in 2016-17.

“We are keeping a tab on global oil price movement. It is too early to say which way it will move. But, our projections in the Union Budget are well within the comfort range,” said a senior government official. Gross tax revenue is projected to grow at 11.7 per cent in the Budget Estimate of 2016-17 as against the Revised Estimate of ₹14.59 lakh crore last fiscal.

Published on January 20, 2018

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