Govt may have some flexibility to lower excise duty: ICRA

By K RavichandranSr. VP, Co-head, Corporate Sector Ratings, ICRA Ltd

Latest excise duty hike on petrol & diesel and its impact on OMCs

According to ICRA assessment, the impact of hike in excise duty on petrol and diesel is largely neutral for PSU OMCs, as they were making over recoveries i.e. higher marketing margins, which in the normal course should have been passed on to the consumers by way of lower prices; however, govt might have seen an opportunity to shore up its revenues to meet its fiscal deficit targets and hence hiked the duties; moreover, consumers have also been benefited in the last couple of months through lower fuel prices; the move does not impact OMCs at the current oil prices; if oil prices move up sharply in future, that might result in under recoveries in absence of timely pass through to consumers. In that scenario, Govt may have some flexibility to lower excise duty instead of passing on entirely to consumers.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.