The reduction in excise duty on fuel, announced on Friday, will result in a revenue hit of Rs 7,000 crore within a fortnight, tax officials said in a press briefing on Friday. However, the net revenue impact will be of Rs 5,500 crore, as trimming of export duties will result in gains of Rs 1,500 crore in the same period.
The Centre has, notably, decided to cut excise duty to Rs 3 per litre on petrol (from Rs 13) and nil on diesel (from Rs 10). The movie is aimed at helping the oil marketing companies (OMCs) such as Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation, who have faced a further pressure on their margin amid the global surge in crude oil prices.
Vivek Chaturvedi, chairman, CBIC said that Middle East crisis has caused disruption in supply of crude, resulting in a significant surge in international prices. However, OMCs have not passed on the hike to the retail customers, thereby creating pressure on their margins.
He also pointed that the situation is dynamic and these are difficult times. Keeping this in mind, the government will review the situation after every 15 days. Chaturvedi added that the department will also have to look at the supplies.
"We are evaluating the revenue implications of the excise duty reduction on petrol and diesel," the CBIC Chair said during the press briefing.
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According to Chaturvedi, the excise relief is aimed at prioritising domestic availability of products.
Oil Companies Under Pressure
According to government and industry estimates, OMCs are currently losing Rs 24-30 per litre on petrol and diesel sales due to the sharp rise in global crude prices.
Crude has surged from around $70 to over $120 per barrel amid the ongoing West Asia conflict and disruptions around the Strait of Hormuz, a key route for global oil supplies. In such a scenario, companies are more likely to use the tax cut to offset losses rather than pass on the full benefit to consumers immediately.
Petroleum Minister Hardeep Singh Puri has made it clear that the government had two choices — pass on the full burden of rising crude prices or absorb part of the shock.
Finance Minister Nirmala Sitharaman also indicated that the duty cut is aimed at protecting consumers from a sharp spike, not necessarily forcing an immediate price reduction.
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