New Delhi : A cut of up to Rs 2.5 per litre in petrol and diesel prices notwithstanding, auto fuel rates in India are about twice the Singapore benchmark with taxes accounting for nearly half the current rates, Moody’s Investors Service said Friday. The government this week cut excise duty by Rs 2 per litre as part of efforts to reduce the prices of petrol and diesel. Petrol in Delhi now costs Rs 68.38 a litre, down from Rs 70.88. A litre of diesel now comes for Rs 56.89 as against Rs 59.14 previously.
“The retail selling prices of petrol and diesel in India even after the reduction is approximately 2.5 and 2 times that of Singapore benchmark prices respectively. As much as 42-50 per cent of the retail selling prices will continue to go to the government as taxes,” it said. Falling retail prices could stimulate demand for petrol and diesel in India, which will be credit positive for oil marketing companies as it will result in higher earnings. Even though the consumption of petroleum products continues to grow, the rate of growth has slowed considerably from fiscal 2016 when prices were at their lowest, it said.
“We expect international prices to stay near current levels for the rest of the year as demand for heating oil in the coming winter months will be compensated by the return of refining capacity that was disrupted by Hurricane Harvey in North America.
“Hence more price falls will only be possible through further reductions in the tax component of prices. Rupee depreciation could be another source of price increase that may need to be compensated by the reduction in taxes,” Moody’s said. In 2016-17, the government got 23 per cent of its revenue from the oil and gas sector. “Therefore, there is limited flexibility for the government to reduce taxes further if it were to maintain its fiscal discipline,” it said.
Penal taxation:
- Petrol prices in India are about twice the Singapore benchmark with taxes accounting for nearly half the current rates, the report said
- We expect international prices to stay near current levels for the rest of the year, Moody’s said
- The cut in excise duty on petrol and diesel will have no impact on the profitability of the three fuel retailers, IOC, BPCL and HPCL
