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  1. Govt may further hike excise on petrol, diesel before Budget

Govt may further hike excise on petrol, diesel before Budget

"Falling crude oil price provide us a headroom for increasing excise duty on petrol and diesel. It will help in meeting fiscal deficit target of 3.9 per cent for the current fiscal," said an official source.

By: | New Delhi | Published: January 22, 2016 4:35 PM
petrol price hike Last week, the government hiked excise duty on petrol by Rs 0.75 per litre and by Rs 2 a litre on diesel, the second increase in duties in less than two weeks, to mop up over Rs 3,700 crore in additional revenue. (Reuters)

The government is looking at one more hike in excise duty on petrol and diesel before the Budget next month so as to raise revenue and stick to the fiscal deficit target for 2015-16.

“Falling crude oil price provide us a headroom for increasing excise duty on petrol and diesel. It will help in meeting fiscal deficit target of 3.9 per cent for the current fiscal,” said an official source.

“The fiscal deficit target is sacrosanct and every effort would be made to meet the target,” added the source.

Government has raised excise duty on petrol and diesel four times in quick succession that will help it garner an additional Rs 14,000 crore in the current fiscal and partly make up for the shortfall in disinvestment receipts and direct tax collections.

Last week, the government hiked excise duty on petrol by Rs 0.75 per litre and by Rs 2 a litre on diesel, the second increase in duties in less than two weeks, to mop up over Rs 3,700 crore in additional revenue.

Oil prices have already fallen to 12-year low to USD 29 per barrel on concerns of weak Chinese economy and a global slowdown. Besides, lifting of sanctions on Iran also added to downward pressure on falling crude oil.

The higher realisation from further excise duty hike will come in handy for the government to maintain fiscal deficit at 3.9 per cent of GDP in current financial year ending March 31, notwithstanding a poor show with regard to stake sale in state-owned companies.

Although the government has targeted to raise Rs 69,500 crore from PSU disinvestment, so far only Rs 12,700 crore has been raised and the likelihood of any major stake sale in the remaining three months of 2015-16 is bleak.

Finance Ministry officials have admitted that there would be a shortfall of around Rs 50,000 crore in disinvestment proceeds and about Rs 30,000-40,000 crore in direct taxes, but expressed optimism that higher realisation from indirect taxes as well as non-tax revenues will make up for the deficit.

The ministry is also insisting on higher dividends from the PSUs in a bid to garner more non-tax revenue.

According to the data, fiscal deficit position has shown a marked improvement at the end of November 2015.

The deficit stood at Rs 4.83 lakh crore, or 87 per cent of the Budget Estimate (BE) for the whole 2015-16. The fiscal situation is, however, better than last year when the deficit was 98.9 per cent of the BE for the same period. 

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  1. N
    Narendra M
    Jan 22, 2016 at 2:07 pm
    (1) This decision to further hike excise duty on petrol and diesel is a rational decision though it may be criticised by opposition parties, but I suppose such criticism can be described as just opportunistic. (2) We are aware that domestic prices of petroleum products are dependent on price of imported crude, price of dollar, our cost of production and various duties and taxes levied by both the Central and State governments. In this connection I wish to say that our government should implement a long term and pragmatic policy about taxation (and subsidies on some) petroleum products. But so far this has not been possible as the party in power lacks political will to implement such a policy. Further, both Central and state governments have used taxes and possibly subsidies on petroleum products to increase revenue and to get votes, too. (3) In view of continuous fall in international price of crude, I believe this is the right time to have in palace a pragmatic pricing and taxation policy for petroleum products.
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