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'Crude fall opportunity to raise fuel excise duty'
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SME Times News Bureau | 21 Apr, 2020
The current low oil prices have once again created ground for the
government to further increase excise duty on petrol and diesel to meet
additional expenditure needs arising from COVID-19 outbreak without
hurting the consumers.
Official sources said that the
present global oil market could easily allow the government to increase
excise duty on petrol and diesel by Rs 3-5 per litre without impacting
their pump prices. This could provide government with additional revenue
between Rs 45,000-75,000 crore during 2020-21 at a time when
expenditure is set to rise to revive economic activity in the country
impacted by lockdown.
No decision on raising excise duty on
petrol and diesel has been taken as of now but the option is available
and the current time is opportune to exercise it, sources quoted above
said.
Global crude oil prices are hovering between $20-25 a
barrel now. In fact, on Monday US oil WTI fell 300 per cent to reach
negative -$37 a barrel level for futures contract slated for May
delivery.
For India, the relevant Indian basket of crude has also
averaged around $25 in April and touched $20 a barrel on April 17 as
per Petroleum Planning and Analysis Cell (PPAC). This is $10 a barrel
lower than March price of $35 a barrel when government decided to raise
excise duty on petrol and diesel (on March 14) by Rs 3 each without
effecting any increase in their retail prices.
If we compare
retail prices of petrol and diesel now with that of March 14 when
government raised excise duty by Rs 3 per litre, things become clearer.
On March 14, when crude prices were around $35 a barrel, even after
factoring in the higher cost, petrol prices stood at Rs 69.87 a litre
and diesel Rs 62.58 in Delhi.
On Tuesday, retail price of petrol
is almost at the same level at Rs 69.59 a litre and diesel at Rs 62.29 a
litre in Delhi, when Indian basket of crude is hovering below $25 a
barrel.
"Even if state-run oil marketing companies retain the
retail price of petrol and diesel at current levels, government could
easily increase excise duty on two products by upto Rs 5 a litre. It
seems that lower than likely fall in retail prices of petrol and diesel
may have been kept keeping this mind," said an oil sector analyst not
willing to be named.
The government has already amended the law
to raise excise duty on petrol and diesel by Rs 8 per litre each in
future to up to Rs 18 per litre in case of petrol and up to Rs 12 per
litre on diesel. This would be useful once it decided to further raise
exercise duty on the two petroleum products. The current oil prices are
expected to soften for some time.
"Demand destruction due to
Covid-19 has created an unprecedented situation in the oil market with
April demand itself down by 30 per cent from 2019 levels. Depressed
prices will continue in the medium term till the economic recovery
situation is clearer," Debasish Mishra, partner at Deloitte India.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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