NEW DELHI: The government may again impose an excise duty of Re 1 per litre on non-branded petrol and
diesel.
The tax proposal put forward by the finance ministry comes at a time when the petroleum ministry is planning to cut retail prices by as much as Rs 5 a litre for petrol and Rs 3 a litre for diesel.
A minister, who did not wish to be quoted, said the Cabinet may discuss the excise duty proposal when it meets on Thursday to decide on fuel price cuts.
"The demand may allow the government to reduce the quantum of price cuts proportionately," he added.
In other words, if the excise duty is reimposed, the effective price cut for consumers could be Rs 4 a litre for petrol and Rs 2 a litre for diesel.
Oil companies are making a profit of Rs 11 a litre on petrol and Rs 4 a litre on diesel due to reduction in prices of imported crude oil. Crude oil, that was at $129 a barrel in June 2008, is now at $39 a barrel.
At that time, the government had been compelled to use a mix of retail price hikes and indirect tax cuts to keep fuel affordable for consumers. The finance ministry too had reduced excise duty on unbranded auto fuels by Re 1 a litre to provide relief from surging global oil prices. It had led to a loss of Rs 22,660 crore to the exchequer.
Now that crude oil prices have dropped, the government is not willing to pass on the entire savings to consumers.
This is mainly because public sector oil companies, such as Indian Oil Corp (IOC), Bharat Petroleum Corp and Hindustan Petroleum Corp, are still losing money on cooking gas and kerosene sold in ration shops, the minister said.
An IOC official said the company is still losing Rs 12.16 a litre on kerosene and Rs 32.97 on every domestic cooking gas cylinder.
A government official, who didn’t wish to be identified, said the finance ministry’s demand is valid because the government’s indirect tax collections have dropped after the economic slowdown.
In November 2008, excise duty collections declined 15% and Customs duty collections by 0.8%. These are expected to plummet 40% in December after an excise duty cut of 4% on a wide group of products to stimulate the economy. The government may end up losing more than Rs 40,000 crore due to various post-Budget duty cuts. Senior officials say additional expenditure in the current financial year could take the country’s fiscal deficit to as high as 5% of GDP, against a target of 2.5%.
Source : The Economic Times