Petrol, diesel price rise: Room to cut auto fuel taxes by Rs 4.50/litre, says Icra

If the Centre needs income from these taxes to be stored at FY21 ranges, it may assist a discount in cesses by Rs 4.5/litre every on petrol and diesel, Icra opined.

With the rise in demand for petrol and diesel, the Centre can minimize auto gasoline taxes by Rs 4.5/litre and nonetheless hold its income from these sources intact at ranges recorded in FY21, analysts at Icra mentioned. Regardless of demand for petrol and diesel falling 10.6% yearly in FY21, the Centre’s earnings from taxes on auto fuels rose a whopping 55% y-o-y to Rs 3.5 lakh crore within the earlier fiscal as a result of in March and Could, 2020, surcharge and cess on auto fuels have been cumulatively elevated by Rs 13/litre on petrol and Rs 16/litre on diesel.

Contemplating the low base of FY21, Icra estimates petrol demand within the ongoing fiscal will rise by about 14% y-o-y, whereas diesel by round 10%. If taxes are stored unchanged, increased demand is seen to extend the mixture income generated from auto fuels cesses by about 13% in FY22, the ranking company mentioned. If the Centre needs income from these taxes to be stored at FY21 ranges, it may assist a discount in cesses by Rs 4.5/litre every on petrol and diesel, Icra opined.

“Increased consumption of fuels ought to assist an increase within the oblique taxes levied on them, affording a window for a partial reversal within the cess hikes that have been imposed final 12 months,” Icra chief economist Aditi Nayar mentioned, including that “such a minimize in cess charges would supply some reduction to family budgets and ease the inflationary pressures associated to the rising international crude costs”.

On Friday, petrol price in Delhi was at an all-time excessive fee of Rs 97.76, rising Rs 4.55 a litre for the reason that similar day a month in the past, as state-run oil advertising corporations regularly raised the bottom value of the merchandise amid rising worldwide oil costs. The bottom value comprise 39% of the retail petrol charges in Delhi, whereas state VAT makes up 23% and central excise account for 34% of the ultimate gasoline value paid by the tip client. Freight costs and seller fee make up for the remainder of the worth.