Prices of petrol and diesel have taken a significant toll which has touched the historic highs over the past nine months. Currently, a litre of petrol costs Rs 91.17 and diesel is sold at Rs. 81.47 a litre. Although the opposition parties, as well as members of the public, have urged the government to lower excise duties to help consumers reduce their burden.
According to analysts, the government has scope to reduce excise duty on petrol and diesel by up to Rs 8.5 per litre without jeopardizing its revenue collection targets.
“We estimate excise duty on auto fuels in FY22 (April 2021 to March 2022), if it is not cut, at Rs 4.35 lakh crore versus budget estimate of Rs 3.2 lakh crore. Thus, even if excise duty is cut by Rs 8.5 per litre on or before April 1, 2021, the FY22E budget estimate can be met,” ICICI Securities said in a note, as quoted PTI.
It expressed optimism for an excise duty cut given demand recovery, impending privatization, and inflation concerns but expected it to be more modest than Rs 8.5 a litre, the news agency reported.
Between March and May 2020, excise duty on petrol and diesel was increased by Rs 13 and Rs 16 per litre, respectively, to Rs 31.8 per litre and 32.9 per litre.
The increase in excise duty was to mop up gains arising from international crude oil prices falling to a two-decade low.
But, with oil prices recovering, it has not yet restored the taxes to their original levels.
“If the cut is more modest, which we expect, FY22 excise duty will be higher than the budget estimate,” ICICI Securities said.
According to PTI, central and state taxes account for 60% and 54% of petrol and diesel prices.
The regular petrol prices in Rajasthan and Madhya Pradesh had crossed the Rs 100-mark in the last month at few places, which levy the highest Value Added Tax (VAT) on the fuel in the country.
Between November 2014 and January 2016, the government had increased excise duty on the prices of petrol and diesel nine times to recoup profits from falling global oil prices.
In all, the government had cut and raised excise duty several times during the past years, but this time, the hike in the excise duty of petrol and diesel have sat on the nerves of the consumers.
