Finmin not for cut in excise duty on petrol, diesel

The finance ministry is not in favour of cutting excise duty on petrol and diesel to provide relief to the common man from spike in their prices but wants states to cut sales tax or VAT on fuel, a senior official said today.

Petrol price today hit a 55-month high of Rs 74.50 a litre, while diesel rates touched a record Rs 65.75, renewing calls for a cut in excise duty to ease the burden on consumers.

The finance ministry official said however that a reduction in excise duty, which makes up for a quarter of retail fuel price, is not advisable if the government is to stick to the path of reducing budgetary deficit.

"Excise duty cut would be a political call, but is not advisable if we have to stick to the fiscal deficit glide path outlined in Budget," he said.

The government is targeting reducing fiscal deficit to 3.3 per cent of the gross domestic product (GDP) in the current fiscal, from 3.5 per cent last fiscal.

"Every rupee cut of excise on fuel will result in a loss of Rs 13,000 crore to the government," the official said, adding that the oil ministry has not yet officially asked for a cut in fuel excise duty.

The official said states should cut VAT on fuel to ease the burden on the consumer.

"Fiscal considerations are far higher than one or two rupee price impact on consumers," he said. "One or two rupee increase doesn't impact inflation."