If crude oil falls, govt might cut excise duty on fuel

Action to be taken if we feel there is a price burden on consumer, says petroleum minister Dharmendra Pradhan

The government may look at cutting down excise duty on petrol and diesel to ease the burden on consumers as and when global crude oil prices start rising again from the current 11-year low levels, said Petroleum Minister Dharmendra Pradhan. He also said the government will protect its interest and the interest of ONGC in its ongoing gas row with RIL.

“In case we feel there is a price burden on consumers, we may opt for excise duty cuts. The price of crude in the global market follows a cycle. Today, it is a downward trend. Prices may go up in future. Our priority is to give continuous relief to consumers,” said Pradhan, on the sidelines of an event on energy security organised by the Confederation of Indian Industry.

Global crude oil prices have slumped to less than $35 per barrel, the lowest in the past 11 years, from a high of $116 per barrel in June 2014. Pradhan’s statement comes a day after the government raised excise duty on petrol by Rs 0.30 per litre and by Rs 1.17 a litre on diesel to make use of slump in oil prices to garner an additional Rs 2,500 crore in the remaining of the current financial year, ending March 2016. Basic excise duty on unbranded petrol was increased from Rs 7.06 per litre to Rs 7.36 and the same on unbranded diesel from Rs 4.66 to Rs 5.83 per litre. Oil marketing companies had on Tuesday cut retail prices of petrol by only 50 paise per litre and diesel rates by 46 paise, while the huge slide in crude prices in the last fortnight warranted a higher cut.

Wednesday’s increase in excise duty was the second such hike in less than six weeks. The government had on November 7 raised excise duty on petrol by Rs 1.60 per litre and on diesel by 30 paise a litre. The government had mopped up Rs 3,200 crore through the excise duty hike.

Prior to the two hikes since November, the government had, in four instalments, raised excise duty on petrol by Rs 7.75 per litre and diesel by Rs 6.50 per litre between November 2014 and January 2015. The four hikes gave the government an additional Rs 2,000 crore last financial year. The Centre’s total collection from excise duty in the petroleum sector stood at Rs 99,000 crore last financial year and Rs 33,000 crore in the first quarter of the current financial year.

Pradhan also said the view that consumers are not getting benefited as a result of the crude price decline is wrong. He argued petrol prices have been reduced as much as 20 times in the past year, leading to a reduction of more than Rs 13 per litre. Diesel prices have similarly been reduced 16 times by around the same quantum of Rs 13 per litre since June 2014.

“India is a welfare state. From where would the funds come for investments in rural roads, health and water infrastructure? This is why state governments have raised value added tax rates and the Centre has raised excise duty,” he said.

Pradhan also informed the single-member judicial commission, headed by former Delhi High Court Chief Justice A P Shah to look into the gas dispute between Reliance Industries and ONGC, will suggest ways to ensure such incidents do not recur, and the panel was constituted to “understand the financial implications and to protect the interest of the government and government companies”. He said the panel will look at the role and responsibilities to be assigned to all the parties involved in the case.

THE BIG DROP

• Oil minister says the govt may look at cutting down excise duty on petrol and diesel to ease consumers’ burden
   
• While global oil prices have slumped from $110 per barrel in June 2014 to $36 per barrel currently, petrol and diesel prices have not come down by the same amount
   
• Reason: Six excise duty hikes since November 2014, including four in 2014-15, which helped the Centre mop up an additional Rs 22,000 crore in FY15. The two duty hikes in FY16 would provide Rs 5,700 crore
   
• Dharmendra Pradhan (pictured) rejected the view consumers are losing the benefit of the crude price decline as petrol prices have been reduced 20 times and diesel 16 times in over a year
   
• The minister said the Shah panel on RIL-ONGC gas row would probe ways of compensation for gas migration and help fix responsibility of the parties involved