The Centre may well reduce auto fuel taxes by Rs 5/litre to ease stress on shoppers as typical value of worldwide crude oil is observed to be about $60 per barrel, analysts at Bank of America (BofA) stated.
“We have raised our FY22 Center’s fiscal deficit by 30 basis points to 7.5% of GDP, expecting `5/litre oil tax cut, BofA added. The Rs 5/litre tax cut can reduce Centre’s income by around Rs 71,760 crore.
The price of Indian basket of crude is currently at $62/barrel, up from $50/barrel in mid-December, supported by global demand recovery and voluntary production cuts from major oil exporting nations. Owing to lower demand, Indian basket of crude prices were in the range of $19-$44/barrel in the first half of FY21, when crude import bill fell 57% annually to $22.5 billion.
“We have retained our 9% FY22 growth forecast with the boost to consumption from oil tax cuts likely to offset impact of the pressure on yields from a higher fiscal deficit,” BofA added.
The brokerage firm has raised its RBI open marketplace operations forecast by $9 billion to $48 billion, with oil imports driving up the present account deficit.
On Wednesday, retail petrol value in Delhi was at an all-time higher of Rs 90.93/litre, increasing by Rs 5.23/litre due to the fact the similar day a month ago, as OMCs progressively improved the base-value of the items amid increasing international crude costs. The Centre’s tax (simple excise, surcharge, agri-infra cess and road/infra cess) is at present Rs 31.83/litre for diesel and Rs 32.98/litre for petrol. In March and May, 2020, surcharge and cess on auto fuels had been cumulatively improved by Rs 13/litre on petrol and Rs 16/litre on diesel.
To offset the impact of the newly imposed agriculture infrastructure cess on finish shoppers from February 1, the surcharge on each petrol and diesel prices have been decreased by only Rs 1/litre although simple excise duty prices now stand decreased at Rs 1.4/litre for petrol and Rs 1.8/litre for diesel. While the cesses and surcharge are not sharable, the states get 42% of the auto-fuel excise duty revenue only from the simple excise duty element. Of course, the states levy their personal VAT on petrol and diesel, which goes exclusively to their coffers, but present higher costs limit the scope of rising VAT additional.