The government has been taking up the issue of high crude oil prices bilaterally with oil-producing countries and with the Organization of Petroleum Exporting Countries (Opec), minister of state of for petroleum and natural gas Rameswar Teli said on Monday.
The price of Indian basket of crude was $74.3/barrel on Monday, up from $50/barrel in end-December, supported by global demand recovery and voluntary production cuts until July-end from major oil exporting nations.
The OPEC plus group on Sunday agreed to increase the output of crude oil by 0.4 million barrels per day from August for five months ending December, which could lower the price. “This is good news for India because there seems to be a ‘no solution’ with the government not willing to lower taxes as consumers pay higher prices for petrol and diesel,” analysts at CARE Ratings noted.
With petrol and diesel demand returning, the Centre could cut auto fuel taxes by Rs 13/litre for the rest of the fiscal, and still keep its revenue from these sources intact at Rs 3.2 lakh crore as estimated in the Budget for FY22, analysts at Nomura said. Without any tax cuts, the revenue collection can go up to around Rs 4.7 lakh crore, it added.
CARE Ratings pointed out that though there could be a reversal of crude price movement, the retail price difference would not be too significant. If exchange rates and tax levels remain unchanged, retail price of petrol will be Rs 98 per litre in Delhi if Brent falls to $70 per barrel, down from Rs 101.6 per litre with Brent trading at $75 per barrel.
Despite demand for petrol and diesel falling 10.6% annually in FY21, the Centre’s income from excise duty on auto fuels rose a whopping 87.8% y-o-y to Rs 3.4 lakh crore in the previous fiscal, data provided by Teli in Parliament showed.
The rise in income can be attributed to cumulative hikes in surcharge and cess on auto fuels by Rs 13/litre on petrol and Rs 16/litre on diesel in March and May 2020. “The excise duty rates on petrol and diesel have been calibrated to generate resources for infrastructure and other developmental items of expenditure keeping in view the present fiscal position,” Teli said.