NEW DELHI :
At a time when crude oil prices are surging amid the Russia-Ukraine conflict, a report by ICRA has said that an excise duty cut on fuels to pre-pandemic levels will cost Centre a revenue loss of ₹92,000 crore in FY23.
After the partial cut in November 2021, central excise rates on petrol and diesel presently stand at ₹27.9 per litre and ₹21.8 per litre, respectively higher than pre-pandemic period of July 2019- March 2020 by ₹8 per litre and ₹6 per litre, respectively.
The report said that the international crude oil price, in Indian basket terms, surpassed the $100-per-barrel mark on February 24, 2022 for the first time since September 4, 2014, fueled by intensifying geopolitical tensions between Russia, world’s third largest oil producer and Ukraine, as well as restrained supply.
“While it is difficult to pinpoint the exact amount of lagged revision in RSPs of MS (motor spirit) and HSD (high speed diesel) that is warranted by the surge in crude oil prices to the current levels, we expect it to be in a range of ₹6-8/litre, i.e. similar to the cushion offered by potential excise reversion to pre-Covid rates,” it said.
“If excise duty on MS and HSD is reduced to pre-pandemic rates, the total revenue loss to the Centre in FY2023 is estimated at ₹920 billion,” it added.
The Union Budget for FY2023 has forecast the excise duty collections to contract by 15.0% to ₹3.4 trillion, after a tepid 0.6% rise included in FY2022 RE (Rs. 3.9 trillion), following the excise reduction undertaken in November 2021.
Mint on Saturday reported that the government is assessing the evolving geopolitical situation and will decide on cutting excise duty on fuels if the current surge in crude price lingers longer than can be absorbed by state-run fuel retailers.
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