Government rules out excise duty cut as fuel prices hit record high

New Delhi: On Monday the Centre ruled out an immediate reduction in excise duty on petrol and diesel but indicated that it could consider options of selling NRI bonds or deposit schemes to foreigners to prevent any further slide in the rupee.

When the rupee hit an all-time low of 72.67 against the dollar before closing the day at 72.45, petrol and diesel prices in the capital also hit their all-time highs. Petrol price hit Rs 80.73 per litre and diesel touched Rs 72.83 a litre.

Senior Finance Ministry officials said that the government is conscious, worried and vigilant about the falling value of rupee but is not alarmed, and said that markets need not panic about the depreciating rupee.

These comments came on the day when Opposition parties held nationwide protests against the surge in fuel prices. At an informal media briefing, a senior government official said that the cut in excise duty will impact fiscal math and dent revenues. “I do not blame the states, even their fiscal situation is precarious. Even states like Bihar, Kerala and Punjab are not in a position to cut state levies on petrol/diesel,” said the official.

The government is also looking at all options to curb the widening current account deficit. “The RBI (Reserve Bank of India) is intervening as and when required. The government is looking at ways to reduce current account deficit. We are considering several options which could include overseas borrowing like NRI bonds or deposit scheme for foreigners. Markets need not panic about depreciating rupee. There is a wrong impression in the market that government not worried about depreciating rupee. The government is vigilant on rupee fall,” another official said.

The government will be able to reduce taxes on oil only when it is able to increase compliance on the non-oil front, ie, income tax and Goods and Services Tax (GST) according to the official. However, he said bringing in petroleum products under GST is unlikely in the near future and the government may only push for inclusion of natural gas under the indirect tax regime as of now.

Price hike of petrol and diesel

A litre of petrol was being sold in Kolkata for Rs 83.75, in Mumbai for Rs 88.26, and in Chennai for Rs 84.07, according to fuel retailer, Indian Oil Corporation (IOC).

Diesel was being sold at the rate of Rs 75.82/ litre in Kolkata, Rs 77.47/ litre in Mumbai, and Rs 77.15/ litre in Chennai.

Only two poll-bound states announced price cut

On Sunday, poll-bound Rajasthan slashed the tax on petrol and diesel as chief minister Vasundhara Raje announced a 4% reduction bringing prices of both the commodities down by Rs 2.5 per litre in the state. On Monday, Andhra Pradesh government announced a reduction of tax on petrol and diesel by Rs 2 per litre.

The Centre currently levies a total excise duty of Rs 19.48 per litre of petrol and Rs 15.33 per litre on diesel. On top of this, states levy Value Added Tax (VAT) — the lowest being in Andaman and Nicobar Islands where 6 per cent sales tax is charged on both the fuels.

(With inputs from Agencies)