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, Mr. Garg said that 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 the elections in Karnataka, he said, “We have not seen anything [on it].”
The Central Government levies Rs. 19.48 excise duty on a litre of petrol and Rs. 15.33 per litre on diesel. State sales tax or VAT varies 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 U.S. 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,” Mr. 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, kept petrol and diesel rates unchanged for the sixth day in a row on Monday.
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.