Excise duty has to be reduced by Rs 10-12 on diesel and petrol, former finance secretary said, saying there was no other choice before the government to protect the consumer from rising global crude as the end to the fuel price looms.
“(Tax) revenue will fall. No way retail prices can reduce without a hit on revenue. Excise duty has to be reduced by Rs 10 to Rs 12. There is no choice. Profitability of OMCs (oil marketing companies) will also get hit," Subhash Chandra Garg said in an interview to CNBC-TV18.
Brent crude oil prices tested $139 a barrel on March 7. Rupee hit an all-time low of nearly 77 a dollar after crude oil surged afresh on reports that the US and its European allies were weighing a ban on Russian oil. This is likely to have a major impact on domestic fuel prices. Petrol and diesel prices are expected to rise as assembly elections in five states including Uttar Pradesh come to an end.
"The situation worsened due to the Russia-Ukraine conflict. Crude at $90 is manageable but crude surging to $130 and $135 poses a completely different situation. All options like adjusting excise duty, passing on some benefits to consumers, or OMCs (oil marketing companies) taking a hit on their margins are there before the government," said Garg.
He added that, before making a final decision, the government must assess the net impact of relief from excise duty cut, which could hit tax revenues.
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