Oil import bill may rise to $50 b: Economic Affairs Secy

The Centre seems to be in no hurry to offer consumers any relief from soaring fuel prices. However, it does feel that rising crude prices can raise the import bill by up to $50 billion, which in turn will have an impact on the current account deficit (CAD).

Economic Affairs Secretary Subhash Chandra Garg, addressing the media on Friday, refused to give a clear answer on duty cuts.

His only response to repeated questions on the fuel price was: “Just watch the price movement (of petrol and diesel).”

He did, however, say that the Centre is watching the situation and adequate steps will be taken.

Brent crude has jumped to over $80 a barrel. On the domestic front, petrol prices have gone up by 98 paise a litre and diesel prices by ₹1.15 since the 19-day freeze lifted on May 14.

Garg said he was not persuaded by the argument that rising fuel prices would benefit the Central exchequer.

His logic was that though there is an ad valorem rate (percentage of the value at which duty is levied) for Custom duty on crude, excise duty is levied at a specific rate on petrol and diesel.

At present, excise is levied at ₹19.48 a litre on petrol and ₹15.33 a litre on diesel.

So, rising crude price may add something to the exchequer through Customs duty, but not excise duty.

States levy VAT ad valorem and the rates range between 6 and 40 per cent on petrol and 6 and 28.5 per cent on diesel.

The Economic Affairs Secretary, however, did admit that rising crude prices will increase the oil import bill by $25 billion to $50 billion under different scenarios.

India spent over $70 billion on oil imports last year, he said, adding that costlier crude will push up the CAD. However, inflation is under control and the fiscal deficit scenario is not worrisome either, he said.

Currency shortage over

The currency situation, Garg said, is back to normal. “We are seeing more deposits of currencies now,” he said, adding that over ₹4,000 crore has been deposited in the currency chest across the country, in contrast to the earlier trend of withdrawal. He did not rule out the Karnataka elections as one of the reasons for the currency shortage a few weeks ago.

Garg did not seem unduly perturbed by the rising bond yield, which touched a four-year high of 7.9 per cent on Friday. Some outflows in the bond and equity markets have been seen, but it is not alarming, he added. “We are nowhere near a 2013-like situation,” he said.

The outflow of $4-5 billion in one-and-half months is not excessive, he said.

The government, he added, will continue with its borrowing programme and does not see any reason to react to the current spike in bond yield.

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