With the surge in oil prices threatening to upset its fiscal maths, Finance Secretary Ashok Lavasa has said India is comfortable with oil prices of up to USD 65 per barrel which would be a manageable range for an importing nation.
With the surge in oil prices threatening to upset its fiscal maths, Finance Secretary Ashok Lavasa has said India is comfortable with oil prices of up to USD 65 per barrel which would be a manageable range for an importing nation. The Budget for 2017-18 has assumed an oil price of USD 65 per barrel in making its expenditure assumptions including subsidy payout, he told PTI. “USD 65 (per barrel) is what we feel is what we should be able to manage with the current allocation (made in the Budget),” he said.
The international crude oil price of Indian basket currently stands at USD 54.23 per barrel.
The slump in oil price in 2014 and 2015 was one of the factors that helped Indian economy notch up big gains by cutting its import bill and reining in inflation.
India, which depends on imports to meet 80 per cent of its oil needs, will have to spend Rs 9,126 crore (USD 1.36 billion) more every year for one dollar per barrel increase in crude oil. Besides, the rising crude oil trajectory impacts inflation and growth.
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“The general view of the experts is the oil price will remain within a manageable range and it was also felt that in case there was a spurt beyond a certain level say beyond 65-70 dollars then Shale gas industry will come into the market and that will have a sobering effect.
“So we feel that in the foreseeable future it will remain within the manageable limit and we should be able to deal with that in the allocation that we have made,” he said.
Asked if the government can manage the situation if the oil goes up to USD 65 without cutting excise duty, he said, “That is a call which has to be taken when the situation arises.”
While LPG subsidy has been fixed, that on kerosene is on the decline with many states are giving it up, he said.
“One state (Haryana) has declared it will declare kerosene free by April. Eight districts have already become kerosene free in November, Chandigarh, Delhi are kerosene free. Telangana, Karnataka has reduced their quota,” he said.
Also, the government is linking the subsidy payout with Aadhaar unique identification number thereby limiting its diversion to unintended beneficiaries.
Gas subsidy being paid only to Aadhaar card owners has helped identify those who are buying kerosene at subsidised rates from PDS shops.
“This move of being able to track the beneficiaries and then link it up with their gas connection, they have been able to identify many beneficiaries. If you have gas connection, then you don’t need kerosene. So lakhs of beneficiaries have been removed by either being ineligible or bogus,” he added.
Lavasa said this process of cleaning up the system will also have an effect on reducing expenditure.