After the Centre cut excise duty on petrol and diesel reducing the fuel retail prices, the government may borrow the entire Rs 1 lakh crore that it will forgo as revenues due to the reduction in levies, according to a report. The government has cut excise duty on petrol by Rs 8 per litre and that on diesel by Rs 6 per litre. It will translate into a reduction of Rs 9.5 per litre in petrol prices and Rs 7 per litre in diesel.
Higher GST and personal income tax collections will be neutralised by additional spending on food and fertiliser subsidies and, therefore, the loss to the exchequer due to the recent excise duty cuts will have to be borne through additional market borrowings, according to the ET report.
While announcing the decision to cut the excise duty on the fuels, Finance Minister Nirmala Sitharaman on Saturday said in a tweet, “We are reducing the central excise duty on petrol by Rs 8 per litre and on diesel by Rs 6 per litre. This will reduce the price of petrol by Rs 9.5 per litre and of diesel by Rs 7 per litre. It will have a revenue implication of around Rs 1 lakh crore per year for the government.”
The price of petrol in Delhi on Tuesday stood at Rs 96.72 a litre as against Rs 105.41 a litre earlier, while diesel will cost Rs 89.62 a litre as opposed to Rs 96.67 earlier. All states across the country have witnessed the price fall after the duty cut by the Centre. Over and above this, Maharashtra, Rajasthan and Kerala have also cut value-added taxes, thus bringing down the fuel prices even further.
The central government had also reduced the excise duty in November 2021 which had a revenue implication of Rs 1,20,000 crore a year for the Centre. “The duty reduction made yesterday has an implication of Rs 1,00,000 crore a year for Centre… Total revenue implication to Centre, on these two duty cuts is thus Rs 2,20,000 cr a year,” the finance minister has said in a tweet.
Sitharaman on Sunday also said the excise duty on petrol and diesel that has been deducted by the Centre is not shareable with states. In another tweet, Sitharaman has said, “Basic Excise Duty (BED), Special Additional Excise duty (SAED), Road & Infrastructure Cess (RIC) and Agriculture & Infrastructure Development Cess (AIDC) together constitute Excise Duty on petrol and diesel. Basic ED is sharable with states. SAED,RIC & AIDC are non-sharable.”
She added that the excise duty reduction of Rs 8 per litre on petrol and Rs 6 per litre on diesel (effective from today) has entirely been made in Road & Infrastructure Cess (RIC). “Even in November ’21, the reduction of Rs 5 per litre in petrol and Rs 10 per litre in diesel was entirely made in RIC,” the finance minister said in another tweet.
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