Crude oil price fell below $60 a barrel — unexpectedly and in less than two months from $86.74. At the beginning of October, when oil prices were hovering around $85 a barrel, little did anyone, let alone the Indian government, know that oil will take a sudden u-turn.
However, the government is in Catch-22 position as it announced an excise duty cut of Re 1 a litre on both petrol and diesel on October 4, which hurt its fiscal position in a poll year. With the oil prices falling drastically now, the government is now considering hiking excise duty by Re 1- Rs 2 a litre on fuel, The Indian Express reported.
According to the national daily, the 30% fall in crude oil prices in the last two months has given room to the government to hike excise duty by Rs 1-2 per litre on petroleum products.
“When we hiked the excise duty last month, crude oil prices were hovering above $85 a barrel and now it has come down to around $60 a barrel. The government may consider hiking the excise duty (on petroleum products) as there is a window to raise it by Rs 1-2 per litre,” The Indian Express reported quoting sources.
Interestingly, while announcing the excise duty cut of Re 1 in October, Finance Minister Arun Jaitley had said that it would impact the centre’s coffer only by 0.05% and won’t impact the fiscal deficit target of 3.3% of the GDP.
At the beginning of this week, the petrol price in Mumbai fell below Rs 80 a litre in a series of cuts following the crude oil price fall and the appreciation in the rupee. The excise duty currently being levied by the central government is Rs 18.48 a litre on petrol and 14.33 a litre on diesel, while VAT levied on fuel varies from state to state.