Government may cut excise on petrol to avert price hike

Discussion in 'Economy & Infrastructure' started by Yusuf, Apr 5, 2012.

  1. Yusuf

    Yusuf GUARDIAN Administrator

    Mar 24, 2009
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    What a relief


    NEW DELHI: The finance ministry has indicated to oil companies that it may reduce the excise duty on petrol to lower their under-recovery burden, a move that is expected to help consumers do without an additional burden.

    Sources said the ministry was "actively considering" a proposal from the oil ministry to reduce duty. At present, the government levies excise duty of Rs 14.45 for every litre of petrol and oil companies are losing over Rs 9 a litre by selling the auto fuel below the international price. Last time the government had lowered excise duty on petrol in 2008 when the international crude price had touched $135. The reduction in duty then was by Re 1 a litre. However, this was restored in 2010-11 Budget. A reduction of Re 1 will help oil companies recover Rs 8,000 crore of under-recoveries.

    By agreeing to lower the excise duty, the finance ministry will at the start of the year itself see a dent in its revenue target, although it can still meet it through buoyancy later in the year. But that's provided the overall economic situation is better than what it has anticipated. With political compulsions in hand and Presidential election ahead, the government is waiting for the passage of the Finance Bill in May before taking any harsh measures such as increase in petrol or diesel prices.

    A senior finance ministry official said the government was serious about giving a push to the decontrol of its motor fuel prices by June this year to cap the subsidy bill and send out a signal that it is committed to reforms. By then, the government also hopes that the international crude price would stabilize with some positive movement on the Iran's nuclear standoff.

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