A government
official said that with hardly any economic activity, an immediate duty hike
will not be productive and could be announced once the lockdown eases and
demand revives.
Yearning
for revenue at a time of deep resource crunch, the Centre is considering
another excise duty hike on petrol and diesel.
The
hike could be notified after the resumption of economic activity once the
nationwide lockdown is broadly lifted.
“There
may be marginal hike in excise duty to offset revenue loss due to lack of demand.
Discussions are being held internally,” said a senior government
official.
A second government official said that with hardly any
economic activity, an immediate duty hike will not be productive and could be
announced once the lockdown eases and demand revives. “It may be notified once
the economic activity restarts more substantially," the person said.
Amid falling international
crude oil prices, the government in March introduced an enabling provision to
hike excise duty on petrol and diesel by Rs 8 per litre in future in the
finance Act.
The government had, on
March 14, raised excise duty on petrol and diesel by ?3 per litre each, which
will help raise an additional Rs 39,000 crore in revenue annually.
This duty hike included Rs
2 a litre increase in special additional excise duty and Rs 1 in road and
infrastructure cess. This hike took the special additional excise duty to the
threshold level of Rs 10 for petrol and Rs 4 in case of diesel.
The limit has now been
increased to Rs 18 a litre in case of petrol and Rs 12 in case of diesel by way
of amendment of the Eighth Schedule of the Finance Act.
Brent crude oil rose on
Wednesday after slumping below $16 a barrel to its lowest since 1999, supported
by voluntary as well as the prospect of forced production cuts to tackle a glut
caused by the coronavirus crisis. US West Texas Intermediate (WTI) was up 9
cents, at $11.66. On Monday, WTI crude had slumped to a stunning $ 37 a
barrel.
The Indian crude basket is
a weighted average of Oman, Dubai and Brent Crude, and is currently around
$20.56 per barrel. The impact of falling oil prices would not be much on
subsidies, though India would be in a comfortable position so far as imports,
and hence current account deficit, is concerned, officials said.
“Every $10 a barrel change
in oil prices leads to an impact of around $15 billion in current account
deficit,” said the first official quoted above. The 2020-21 petroleum subsidy
budgeted estimate, of Rs 40,915 crore, is all on account of liquefied petroleum
gas, as kerosene subsidies have been eliminated.
Aditi Nayar, principal
economist, ICRA said that the fall in crude oil prices has not transmitted into
the retail prices of petrol and diesel.
"However, the plunge
in consumption of various fuels, especially during the lockdown period, would
have an adverse impact on the state governments' revenues," said
Nayar.
With the slowdown in India
due to the lockdown, India cannot take advantage of the oil price crash as it
could have, as economic activity has come to a halt.
The government’s revenues
from the oil sector is expected to take a hit if there is no excise duty
hike.
For the Centre, most of the
taxes on the petroleum sector are specific in nature and not based on the price
of the products, unlike those of states. Its revenue will be hit because of
lower consumption.
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