India Forgoes Rs 14,000 Crore Tax Revenue to Cushion Fuel Price Hikes
Quick Look
- India's government has sacrificed nearly Rs 14,000 crore in tax revenue by reducing excise duty on petrol and diesel to protect consumers from rising fuel prices due to the West Asia crisis.
- Oil companies continue to face daily losses of around Rs 600 crore.
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Why It Matters
The Indian government reduced excise duty on petrol and diesel to shield consumers from rising fuel prices, which were triggered by tensions in West Asia affecting imports. This move has a significant fiscal cost.
New Delhi, The Centre has forgone nearly Rs 14,000 crore in tax revenue after reducing excise duty on petrol and diesel to shield consumers from rising fuel prices triggered by the West Asia crisis, said Sujata Sharma, Joint Secretary in the Petroleum Ministry, on Monday.
The government had cut central excise duty by Rs 10 per litre on both petrol and diesel on March 27, following a sharp rise in global crude oil prices due to tensions in West Asia.
"West Asia crisis, our imports are affected, like 40% of our crude import, 90% of our LPG import and almost 65% of our natural gas import, but all efforts have been made to ensure the smooth supplies of petroleum products within the country," Sujata Sharma said.
She said the government's duty reduction has come at a high fiscal cost, even as oil marketing companies (OMCs) continue to face losses.
According to Sharma, OMCs are still incurring losses of around Rs 600 crore per day despite recent increases in fuel prices.
She added that domestic LPG production has reached 50,000 tonnes per day as authorities work to maintain uninterrupted fuel supplies.
Addressing concerns over panic buying in some states, Sharma said fuel supply is being closely monitored.
"LPG retail outlets are being seen in some states as panic buying, like some districts of Gujarat, Maharashtra and UP. The main reason behind this is that there is some agricultural demand. Apart from this, there is some bulk demand."
"On the OMC level, all the retail outlets are being monitored closely. Supply situation is being monitored closely, so that if the intermittent dryouts are somewhere, then they will be addressed," Sharma added.
She said petrol and diesel stocks at retail outlets have been replenished to avoid shortages.
"Stocks, petrol and diesel, all the retail outlets have been replenished," Sharma said.
On piped natural gas (PNG) expansion, Sharma said 7.99 lakh PNG connections have been gasified, while infrastructure is ready for another 2.87 lakh connections.
She also said LPG deliveries in the past four days have exceeded bookings.
Open Questions
- What is the long-term strategy to address the fiscal deficit caused by the duty reduction?
- What measures are being taken to ensure the profitability of oil marketing companies?
- How will the government balance consumer protection with fiscal responsibility in the future?
- What is the projected duration of the West Asia crisis and its impact on India's energy security?
