AgenciesIndia's finance ministry is considering cutting excise duties on petrol and diesel to cushion the impact of record high domestic prices, three government officials close to the discussions said.
A doubling in the price of crude oil over the past 10 months has contributed to record fuel prices at gas stations in India. But taxes and duties account for roughly 60% of the retail price of petrol and diesel in the country, the world's third biggest consumer of crude oil.
As the coronavirus pandemic hit economic activity, Prime Minister Narendra Modi's government twice raised taxes on petrol and diesel in the last 12 months to boost sagging tax revenues instead of passing on the benefits of low oil prices last year to consumers.
India's Finance Ministry has now started consultations with some states, oil companies and the oil ministry to find the most effective way to lower the tax burden on consumers without federal finances taking a big hit, the sources said.
"We are discussing ways in which prices can be kept stable. We will be able to take a view of the issue by mid-March," said one of the sources.
The sources, who asked not to be named as the deliberations are private, said the government wants oil prices to stabilise before cutting taxes, as it does not want to be forced to change the tax structure again, should crude prices rise further.
India's Finance Minister Nirmala Sitharaman recently said: "I can't say when we will reduce taxes on fuel, but (the) centre and states have to talk to reduce fuel taxes".
India's Finance Ministry and oil ministry did not respond to an email requesting comment.
The high fuel prices have prompted some Indian states to cut state-level taxes on petrol and diesel to rein in prices.
Another one of the sources said a decision on fuel taxes may only be made following a meeting of OPEC and major oil producers, also known as OPEC+, later this week.
"There is an expectation that OPEC+ would agree to ease oil output curbs, we hope oil prices will stabilise after their decision," this source said.
India has called on OPEC+ to ease production cuts as higher crude prices are hitting fuel demand in Asia's third largest economy and are contributing to inflation.
The high fuel prices could also affect Modi's popularity ahead of state assembly polls in four states in March and April.
Modi and India's ruling Bharatiya Janata Party are already facing their biggest political challenge in years with tens of thousands of farmers protesting against three farm laws passed by his government in 2020.
The federal government and states together raised some 5.56 trillion rupees ($75.22 billion) in revenues from the petroleum sector in the fiscal year ended March 31, 2020, based on government data.
In the nine months of this fiscal year (April-December 2020), contributions from the sector were about 4.21 trillion rupees, despite a significant decline in local fuel demand, the data showed.
A doubling in the price of crude oil over the past 10 months has contributed to record fuel prices at gas stations in India. But taxes and duties account for roughly 60% of the retail price of petrol and diesel in the country, the world's third biggest consumer of crude oil.
As the coronavirus pandemic hit economic activity, Prime Minister Narendra Modi's government twice raised taxes on petrol and diesel in the last 12 months to boost sagging tax revenues instead of passing on the benefits of low oil prices last year to consumers.
India's Finance Ministry has now started consultations with some states, oil companies and the oil ministry to find the most effective way to lower the tax burden on consumers without federal finances taking a big hit, the sources said.
"We are discussing ways in which prices can be kept stable. We will be able to take a view of the issue by mid-March," said one of the sources.
The sources, who asked not to be named as the deliberations are private, said the government wants oil prices to stabilise before cutting taxes, as it does not want to be forced to change the tax structure again, should crude prices rise further.
India's Finance Minister Nirmala Sitharaman recently said: "I can't say when we will reduce taxes on fuel, but (the) centre and states have to talk to reduce fuel taxes".
India's Finance Ministry and oil ministry did not respond to an email requesting comment.
The high fuel prices have prompted some Indian states to cut state-level taxes on petrol and diesel to rein in prices.
Another one of the sources said a decision on fuel taxes may only be made following a meeting of OPEC and major oil producers, also known as OPEC+, later this week.
"There is an expectation that OPEC+ would agree to ease oil output curbs, we hope oil prices will stabilise after their decision," this source said.
India has called on OPEC+ to ease production cuts as higher crude prices are hitting fuel demand in Asia's third largest economy and are contributing to inflation.
The high fuel prices could also affect Modi's popularity ahead of state assembly polls in four states in March and April.
Modi and India's ruling Bharatiya Janata Party are already facing their biggest political challenge in years with tens of thousands of farmers protesting against three farm laws passed by his government in 2020.
The federal government and states together raised some 5.56 trillion rupees ($75.22 billion) in revenues from the petroleum sector in the fiscal year ended March 31, 2020, based on government data.
In the nine months of this fiscal year (April-December 2020), contributions from the sector were about 4.21 trillion rupees, despite a significant decline in local fuel demand, the data showed.
( Originally published on Mar 01, 2021 )
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44 Comments on this Story
 | Ajay1 hour ago How to Work Less to Achieve More: amzn.to/2ISpShs |
| Jayeshkumar Panchal2 hours ago Biggest Tax on Fuel is not by the Government, but as this Huge Wastage of Energy and Fuel on account of ignorance and arrogance of our Automakers; unwilling to invent/implement Fuel saving Technologies. . . . Our Automobiles made a Huge Energy Mistake right from their creation more than a century and half ago, of not recovering their Kinetic Energy while braking and using that same Energy for powering their next Acceleration; and then stupidly using a lot of New Energy, Engine Power and Fuel for their Next Acceleration. This Simple Energy Mistake has unfortunately remained till date in all our Automobiles even after a Century of Motoring and many Oil Crisis and Wars, and this huge Air Pollution and Climate crisis, but is sadly being repeated even in those Electric and Hydrogen vehicles, with even the Latest of these Green Cars still using those Energy Wasting Friction Brakes!, ..that too on all 4 wheels!. . . . A Drastic Reduction in Energy and Fuel consumption as well as the Emissions from Automobiles is possible, by getting rid of their Friction Brakes and using a Simple Energy Mechanism for Recovery of most of their Kinetic Energy while Braking, and reusing that same Energy for powering the Next Acceleration!. ..just like how a simple Energy Mechanism in a pull-back Toy Car does it so beautifully. ..Trrrr (= Braking), ..Vroom (= Free Acceleration!). |
 | bsrahmd 2 hours ago A basic universal commodity that every country needs. I don't understand why they can't fix a price , but let it fluctuate up and down by speculators. Surely after all these years of pumping oil, they would have known which country need what quantity of oil and they can pump out accordingly. Its not that one day they need X amount of oil, and the next day they need X/10 amount of oil and the very next day their requirement is 5 times X. Surely, the globalised world could fix the price and review it every , say 5 years or so. After all its as basic as wheat or rice for every global citizen. Who will bell the cat ? |