Petrol, diesel excise duty cut; prices won’t change, Pg1

Key Highlights:

• The Union government reduced the special additional excise duty on petrol and diesel by ₹10 per liter each on Thursday.
• The duty cut aims to reduce the fiscal burden on oil marketing companies (OMCs) due to rising oil prices, not to lower consumer fuel prices.
• The excise reduction is expected to cost the exchequer ₹7,000 crore over the next 15 days.
• Export duties on diesel were hiked to ₹21.5 per liter and on ATF to ₹29.5 per liter, expected to add ₹1,500 crore to the exchequer.
• OMCs face under-recoveries of about ₹26 for every liter of petrol and ₹81.90 a liter of diesel.

Detailed Insights:

• The government will review the excise rates every two weeks, considering import trends and revenue implications due to the dynamic situation in the energy market.
• The West Asian conflict has pushed Brent crude futures to over $111 per barrel, increasing pressure on domestic fuel prices.

Brent Crude Oil: The global Benchmark

• Despite the excise duty reduction, public sector OMCs are maintaining fuel prices, absorbing losses estimated at ₹24 a liter for petrol and ₹30 a liter for diesel.
• Private firms like Nayara Energy have started increasing petrol prices by ₹3 a liter and diesel prices by ₹5 a liter, passing on higher input costs to consumers.
• The government clarified that there is no proposal for a lockdown due to the fuel crisis, despite the impact of the excise duty reduction on taxation revenues.

Key Concepts Involved:

• Excise Duty: A tax levied on the production or sale of goods within a country.
• OMCs (Oil Marketing Companies): Companies involved in the refining, distribution, and marketing of petroleum products.
• Under-recoveries: Losses incurred by OMCs when selling fuel below the cost of supply.