No room to cut excise duty on fuel, says FM

Blames oil bonds issued by UPA govt to OMCS

Finance Minister Nirmala Sitharaman on Monday said the Centre had little room to cut excise duty on petrol and diesel because of the cost burden of the oil bonds issued by the previous United Progressive Alliance (UPA) government.

“We don’t do so many tricks like the UPA government. They issued oil bonds for which the principal amount is over ~1 trillion, and for the last seven fiscals, the government has been paying over ~9,000 crore interest annually,” Sitharaman said in a select media briefing. “This government is paying for the oil price reduction of 2012-2013. If I did not have this burden, I would have also been able to reduce fuel prices,” she added.

The principal outstanding on the oil bonds is ~1.3 trillion, she said. The government has to repay ~10,000 crore in the current fiscal year, another ~31,150 crore in 2023-24, ~52,860 crore in the following year, and ~36,913 crore in 2025-26.

Her statement comes at a time when fuel prices are at an all-time high in most states. More than half the country has petrol at over ~100 a litre, while diesel is above that level in Rajasthan, Madhya Pradesh, and Odisha.

The UPA government had issued oil bonds to the tune of ~1.44 trillion to oilmarketing companies (OMCS) to compensate them for a huge financial burden amid the artificially suppressed retail selling price of fuel.

On Tamil Nadu cutting the petrol price by ~3 a litre, Sitharaman said, “It is a case where a state increased it by ~7 per litre and then brought it down by ~3 per litre. But cutting taxes is helpful from consumers’ perspective…fuel is a difficult issue and the petroleum ministry is seized of the matter.”

On inflation, she said she expected the retail price inflation rate to remain in the range mandated by the Monetary Policy Committee.

The finance minister said the government’s focus is on increasing capital expenditure as the economy revives. “The message that I have given out is: Spend on capex. Let what’s to be spent in Q4 be spent in Q3 and so on... So there is no reduction on capex,” she said. “With inflation down and core sector growth and consumption going up, the economy is clearly coming out of the challenges of the second wave,” she added.

On the issue of the new income tax portal malfunctioning even three months after the launch, Sitharaman said Infosys had already been reminded about the problem. “I know there are still issues. Infosys is making some changes. The revenue secretary is monitoring it. Hopefully in the coming 2-3 days, the firm should completely fix the issues,” she said.

The government, she said, had received several representations on the glitches, and demanding the restoration of the old portal. “It may not be possible to revert to the old portal now due to the new features and details in the return forms now,” she said.

She said the rules that would lead to the scrapping of the retrospective tax demands made on companies such as Cairn Energy Plc and Vodafone Plc would be framed soon.