Taking advantage of the fall in global crude oil price which gives it the chance of raising tax revenues from oil products without stoking inflation, the government on Tuesday hiked excise duty on petrol and diesel for the second time in less than three weeks. It raised excise duty on petrol by R2.25 per litre and by R1 a litre on diesel but IOC the largest oil marketer said the extra tax won’t be passed on to the consumers.
The centre’s indirect tax collections grew at around 5% in April-October this year, much lower than the pace required to meet budget targets while direct taxes are almost moving in tandem with the projections. Though major savings in subsidies are expected due to the fall in global commodity prices, the government also requires to somewhat keep its productive spending intact to offset the slump in private investment. The
GDP growth for the second quarter of 5.3% was achieved with help from higher government spending.
While the centre’s fiscal deficit is budgeted to be 4.1% of GDP for the current fiscal, it stood at 90% of the target in April-October period.
The second excise duty hike in three weeks will help raise additional R4,000 crore in four months to March-end. Together with R1.50 a litre excise duty hike effected from November 12, the government will mop up about R10,000 crore in reminder of current fiscal.
“This (excise duty hike) is not being passed on to the consumers,” IOC chairman B Ashok told PTI.
“Since we had only yesterday revised petrol and diesel prices, we decided a change so soon is not warranted.”
With assembly election underway in Jammu and Kashmir and Jharkhand and polls due in Delhi soon, the state-owned fuel retailers have decided to absorb the excise duty change.
Oil firms had cut petrol and diesel prices by 91 paisa a litre and 84 paisa per litre respectively to factor in slump in international oil prices.
Asked if oil companies while revising rates on Monday had factored in a possible excise duty hike, he said the price cut was a true reflection of fall in international oil rate – from $93.23 per barrel in first fortnight of November to $87.21 in second half, and devaluation of rupee value – from R61.46 to a US dollar to R61.80. WTI crude for January delivery fell as much 3.7% to $63.72 a barrel, Bloomberg reported on Monday.
“We are absorbing the excise duty increase for now. We are keeping track of the changing scenario and will take appropriate steps as the situation warrants at the next revision (due in mid-December),” Ashok said.