As Brent crude hovered around $80/barrel, causing domestic auto fuel prices to scale new highs, petroleum minister Dharmendra Pradhan on Tuesday reiterated that the government was looking at ways to keep rising petrol and diesel prices in check. “We are looking at all alternatives,” he said, amid rumours that the Centre might reduce the excise duties on petrol and diesel if Indian basket of crude breaches $80/barrel. Currently, the Indian basket is above $77. Sources said the PMO convened a meeting on Tuesday on the issue attended by officials from the petroleum ministry and the revenue department. Pradhan is expected to meet the heads of oil marketing companies on Wednesday to discuss the matter.
Meanwhile, the finance ministry fears a duty cut will potentially worsen the Centre’s fiscal deficit from the targeted 3.3% for FY19. The worry is that if the duty is reduced now, the Centre may not have much of a manouvering space left when the Indian crude oil basket breaches, say, $100 per barrel in the coming quarters. “It would be wise if states start cutting down on their taxes, as they gain more than the Centre when oil prices rise,” said an official source. Nevertheless, the ministry will intervene if there is a strong case for relief.
The central excise is now 25.4% of the retail price of petrol in Delhi while state VAT’s share is 21.3%. While Central excise duties remained static at Rs 19.48/litre on petrol and Rs 15.33/litre on diesel since October last year when these taxes were cut by Rs 2/litre, the state-level taxes have risen in tune with the fuels’ price increases.