NEW DELHI, May 19: The government has indicated that it may not lower duties on fuel immediately, a move that will mean that pump prices for petrol and diesel may keep rising in line with rising global crude oil prices, while pushing up India’s oil import bill by $25-50 billion during the current financial year.
“If prices go up, obviously this (import bill) will have an impact. But under different scenarios, we see the impact ranging from roughly about $25 billion to maximum $50 billion… Basically, it is the oil which impacts the CAD (current account deficit), so the impact on oil might influence the CAD,” economic affairs secretary Subhash Chandra Garg told reporters.
Asked about the impact of higher retail prices on consumers, even as the government mops up more revenue from one of the most taxed commodities, Garg said that an increase in oil prices does not generate significantly higher revenue, besides maintaining that some duty adjustments had already taken place.
Global crude prices touched $80 a barrel on Thursday, while petrol prices shot up to Rs 75.61 a litre on Friday, while diesel was at 67.08 a litre in Delhi. A year ago, petrol sold for Rs 65.32 a litre, while diesel cost Rs 54.90 a litre in the capital.
The government’s decision to maintain high duties — both excise and customs — has come in for severe criticism and is seen to be anti-consumer. In the run-up to the Karnataka elections, oil companies had suspended daily fuel price adjustments but this may actually force them to raise prices to cover for the loss.
Petrol prices have risen by about a rupee per litre since Monday when state-owned fuel retailers resumed daily revision in retail prices after a19-day pre-Karnataka poll hiatus. Diesel prices have gone up by Rs 1.15 a litre during this period. Garg, however, maintained that oil prices are cyclical and they may not impact the growth rate or the fiscal situation. “There is no great relation between oil prices and growth. Even if prices remain somewhat elevated, we might and we should see very strong growth,” he said.
He also ruled out a significant impact on fiscal deficit. “The growth parameters are also very sound, macro economic parameters also continue to be very sound, the inflation is within the range. So, on the macroeconomic front, the economy continues to do well and we have no downward revision on growth or upward revision on fiscal deficit. So none of those things are worrying,” he said.
