Finance Ministry is considering cutting excise duty on petrol and diesel to reduce the impact of record-high domestic prices, three government officials close to the discussion. The doubling of the price of crude oil in the last 10 months has added to record fuel costs at fuel stations.
But taxes and duties account for roughly 60 percent of the retail price of petrol and diesel in the country, the world’s third-biggest consumer of crude oil.
The Coronavirus pandemic, the economy was hit badly PM Modi’s government raised petrol and diesel prices to promote dropping down tax revenue rather than passing on the benefits of lower oil prices to consumers last year.
India’s Finance Ministry has now started consultations with some states, oil companies, and the oil ministry. 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.
Sources said those who have not been named as the deliberations are private, adding that the government wants oil prices to stabilize before cutting taxes, as it should not be forced to change the tax structure again. , Crude oil prices should increase further.
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.” The source said, that there is an expectation that OPEC+ would agree to ease oil output curbs, we hope oil prices will stabilize after their decision.
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 fuel prices may affect Modi’s popularity ahead in the state assembly polls as the BJP government is facing its biggest political challenge in years with tens of thousands of farmers protesting against three Farmer Bill passed by Modi’s government in 2020.
Finance Minister Nirmala Sitharaman said- I can’t say when we will reduce taxes on fuel, but (the) center and states have to talk to reduce fuel taxes.
High fuel prices have prompted some Indian states to cut state-level taxes on petrol and diesel to control prices.
Contribution of Petroleum Sector in the Fiscal Year
- The center and states together raised some ₹ 5.56 lakh crore in revenues from the petroleum sector in the fiscal year ended March 31, 2020, based on the government data.
- In the nine months of this fiscal year (April-December 2020), contributions from the sector were about ₹ 4.21 lakh crore, despite a significant decline in local fuel demand, the data showed.
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