Govt may not reduce excise duty on fuel soon: Official

The retail inflation, as measured by the Consumer Price Index (CPI), was at a 77-month high at 7.6% in October. Although it softened a bit to 6.9% in November, it was still above the Reserve Bank of India’s medium-term target of 4%, with a band of plus or minus 2%.

The Centre is not in a position to forgo easy revenues at a time when it needs huge funds to fight the pandemic and revive the economy, a government official said on Tuesday, a remark that came against the backdrop of growing demands to reduce taxes in order to provide relief to consumers.

Petrol and diesel became costlier by 25 paise per litre on Tuesday in the Capital (Reuters)

On Tuesday, petrol price crossed Rs.85 a litre in Delhi, hitting a new high for the fifth time in less than two weeks since January 7 even as India’s average crude oil import price softened a bit, according to official data.

“Now, there is no pressure of inflation as retail inflation eased to a 15-month low, at 4.59%. Hence the government would like to wait till budget on reducing excise duty on fuel. However, a final decision will be taken by the competent authority,” the official added, requesting anonymity.

The retail inflation, as measured by the Consumer Price Index (CPI), was at a 77-month high at 7.6% in October. Although it softened a bit to 6.9% in November, it was still above the Reserve Bank of India’s medium-term target of 4%, with a band of plus or minus 2%. Retail inflation fell sharply to 4.59% in December, mainly due to declining food prices.

Diesel surged to a record Rs.82.13 per litre in Mumbai, according to state-run Indian Oil Corporation (IOC). Petrol was sold at Rs.91.80 a litre on Mumbai. Retail rates of the two auto fuels vary across the country because of differences in local levies.

According to IOC, the largest fuel retailer in the country, petrol and diesel rates have been revised upward by Re.1 a litre each after January 7 in four small doses of 25 paise each on January 13, January 14, January 18 and January 19.

Official data showed that India’s average crude oil import price was Rs.3,977.18 per barrel on January 7, when petrol price in Delhi, at Rs.84.2 per litre, jumped to an all-time high for the first time after about 27 months. Its previous record was Rs.84 a litre on October 4, 2018.

Even as the current price of Indian basket of crude is Rs.3,972.74 a barrel, marginally lower than the January 7 figure, the retail prices of automobile fuels were raised. The price of Indian basket of crude oil represents actual average import cost that also factors in the rupee-dollar exchange rate. India, which imports more than 80% of crude oil it processes, pays the import bill in dollars.

Requesting anonymity, a second government official said oil marketing companies enjoy pricing freedom. They align pump prices of auto fuels daily with their respective international benchmarks, which may not necessarily move in tandem with international crude oil prices. According to Indian refiners, crude constitute about 90% of the refining costs.

State-run oil marketing companies – IOC, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan petroleum Corporation Ltd (HPCL) — did not respond to email queries. The three companies enjoy monopoly in fuel retail.