Finance Minister Nirmala Sitharaman on February 22 said that the government is closely watching the geopolitical developments and their impact on crude price, and the government will take a call on a possible excise duty cut on fuel prices based on that.
International crude oil price is over $96 a barrel, gaining almost 40% since December. The heightened tension of a possible Russian invasion on Ukraine looms large and adds to the volatility.
"Crude oil is a worrisome situation where we actually voiced that we wanted a diplomatic solution for the situation that is developing in Ukraine, all these headwinds on the crude. It is one of the very important considerations. We'll have to see how it goes. We are keeping a watch on Brent,” the FM said.
Sitharaman was talking at a press briefing in Mumbai, during her two-day stay since February 21. She has been meeting industry, trade, and financial market stakeholders to discuss the recently announced Union Budget for the financial year 2022-23.
The oil marketing companies (OMCs) -- Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation– can change the price of fuel sold at retail pumps every day to align it with the international rates. But they have left the prices unchanged since November now despite the steep increase in crude oil prices, leading to worries that they may soon increase the prices.
There were expectations that the central government may reduce the excise duty on fuel which can lead to state cutting taxes too, but that has not happened so far. The duty and taxes account for 40-50% of the price, and are a major source of revenue for the Center and state governments.
When asked if the government will consider a cut in excise duty to reduce the price of diesel and petrol, the FM said, "The prime minister had cut fuel tax before Diwali in response to calls from the public. The problem is that fuel prices are high because of global supply issues. The challenge also is that there is a shortfall in supply as well," she said.
The central government had last cut excise duty from November 4, 2021, to provide relief from prices. Crude oil price was at $80 at the time. The FM said that why OMCs had not increased the prices despite the rise, is their decision.
Moneycontrol asked the FM that amidst uncertainty over global factors that are beyond the government’s control and expectation that OMCs may increase the price, at what stage would the government consider another excise duty cut?
"When we come at the stage, we will come out publicly," Sitharaman said.
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