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2 weeks ago
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ARTICLE AD BOX
Summary
India’s excise tax cuts can’t fully shield fuel retailers hit hard by the Gulf war’s oil shock—and not for long anyway. It’s time for bold reforms. Letting higher fuel prices moderate consumption would serve India’s fiscal health, oil companies and people at large better.
With under-recoveries of fuel retailers exceeding last week’s cut in special excise duty and the war in West Asia still in escalation mode, pressure on their margins is likely to continue.
By the government’s estimates, oil companies are suffering losses of about ₹24 per litre on petrol and ₹30 per litre on diesel. So, the ₹10 each reduction in duty to ₹3 per litre on petrol and zero on diesel will fill only a part of their loss gap.
For the Centre to even partly cover their losses is unsustainable anyway, given its fiscal limitations. Annualized, the duty cut means an estimated ₹1.5 trillion of tax revenue forgone. The mop-up from a new export levy on diesel and aviation fuel can’t compensate; its aim is to keep the stuff at home by repricing our exports out of global markets, not revenue.
This device of using prices as an adjuster of demand and supply should be used to modulate Indian fuel use, especially now that oil-infrastructure damage has made a snap-back to normalcy impossible.
The only sustainable option is to let big oil retailers raise prices as their pricing strategies would dictate. Fuel users can’t escape paying a price so many others are paying for far-off follies. It’s time to go in for bold oil-sector reforms.
English (US) ·