There is a growing pressure on the Narendra Modi-government to cut excise duty on petrol and diesel at a time global crude prices have spiked to a six-month high of about $50 per barrel and inflation is showing signs of inching up. However, officials said they would “watch the trend before taking any action as they cannot let inflation go out of hand”. After showing a downtrend since June 2014, crude prices have been on the rise since January 20 this year. Brent has declined from the high of $115 per barrel to a low of $26.39 a barrel in January and surged to around $50 last week.
The excise duty on petrol has increased 126.6 per cent to around Rs 21.48 per litre from Rs 9.48 per litre in July 2014. In the case of diesel, it has been hiked 386.8 per cent to Rs 17.33 per litre from Rs 3.56 per litre. “The government could look at reducing the excise duty at some point. This would be when the price of petroleum products increases and the burden falls on the consumers. The government’s primary responsibility is to give relief to consumers and we will do this,” petroleum minister Dharmendra Pradhan had said. The Indian Foundation of Transport Research and Training (IFTRT) has written to finance minister Arun Jaitley seeking a rollback of the nine excise duty hikes on diesel between November 2014 and January 2016.
“The central government and later various state governments periodically increased excise duty and sales tax on diesel to retain the benefit of plummeting international crude oil prices. Now, the international crude oil prices have shot up… the truck rentals, too, are shooting up more because of the diesel price hike and other reasons. It is high time that the Centre reduces/rolls back at least half of the excise duty increase on diesel since November 2014,” S.P. Singh, senior fellow at the IFTRT, wrote in a letter to Jaitley. Goldman Sachs had said supply disruptions from Nigeria – Africa’s biggest crude oil producer – would lead to a deficit. This triggered the prices to head north and touch a six-month high last week. The disruptions triggered a U-turn in the outlook for the oil market from Goldman Sachs, which had long warned of global storage hitting capacity and of another price crash to as low as $20 per barrel.
The NDA government took the benefit of a drastic fall in oil prices and hiked the excise duty on auto fuel several times since November 2014 to garner up to Rs 700 billion. India is highly dependent on imports to fulfil its energy needs. Therefore, the fall in crude prices has not only helped the government control its current account and fiscal deficits but also rein in inflation, which had been posing a serious challenge to the economy. However, the recent spike has again raised concerns of current account deficit rising as soaring oil prices have the potential to push up inflation besides increasing costs for the industry. Austin Czarnik Womens JerseyShare This