Fiscal math won’t permit excise cut

As petrol and diesel prices went through the roof on Tuesday – hitting Rs 86.72 per litre in Mumbai – BJP national spokesman Nalin Kohli had the audacity to dub the hike “good news”.“Rise in fuel prices is good news for states as they will be able to earn more revenue by way of VAT...Yes, the Centre also earns by way of excise but the states will also get the advantage,” Kohli told a news channel. He added, “My point is, this is a good time to bring petrol under GST.”

Even as Kohli was sharing his brilliant piece of insight, a top official said the Government will not cut excise duty on petrol and diesel to cushion spiralling prices, as it has limited fiscal room to be able to absorb any dent in revenue collections.

With imports becoming costlier because of a free-fall in rupee against the US dollar, the government believes the current account deficit will overshoot the target and it cannot "disturb fiscal maths by cutting excise duty on petrol and diesel," the official, who wished not to be identified, said.

Chandrababu Naidu had a dig at the BJP government and said that petrol would be soon sold at Rs 100 per litre.

Also, in an election year, the spending cut is not an option, the official said, reasoning that it would hamper government's spending on development schemes.

Last week, credit rating agency Moody's Investors Service, too, said there are risks of India breaching the 3.3 per cent fiscal deficit target for the current financial year ending March 31, 2019, as higher oil prices will add to short-term fiscal pressures.

Almost half of the fuel price is made up of taxes. The Centre currently levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. On top of this, states levy Value Added Tax – Mumbai, in fact, has the highest VAT of 39.12 per cent on petrol.

But as the prices surged for the tenth consecutive day, Andhra Pradesh Chief Minister Chandrababu Naidu had a dig at the BJP government and said that petrol would be soon sold at Rs 100 per litre. Addressing a press conference, the Andhra Pradesh chief minister said that in addition to petrol prices, the rupee will also touch 100 against the dollar.

After the hike on Tuesday, the total increase in petrol prices is around Rs 2.50 per litre, while for diesel it has crossed Rs 3 per litre in the last one month.

Senior Congress leader P Chidambaram blamed the Centre for rising petrol and diesel prices, saying that it was happening due to "excessive taxes". In a series of tweets, the former finance minister also demanded that petrol and diesel be brought under GST immediately.

According to sources, the Congress is planning a countrywide protest on September 6.