The government may again hike the excise duties on petrol and diesel to cover up for the huge expenditures on the coronavirus, as global oil prices show signs of decline amid weak demand and increased output.
Official said the immediate task before the government was to support the different sectors of the economy which had been impacted and are likely to be affected by the virus. “The question is not whether we would be breaching the fiscal deficit numbers. We have to look at options to garner resources,” officials said.
Officials said the finance and commerce ministries and the Niti Aayog were studying the economic impact of the pandemic. The monetary and fiscal response measures were being studied.
World oil prices had fallen to $25 per barrel last week. Goldman Sachs has forecast it could touch $20 per barrel, with some reports indicating prices could plunge to $10 per barrel if Saudia Arabia continue to pump oil.
The government had hiked the excise duty on petrol and diesel by Rs 3 each per litre on March 14.
Officials had said the increase in excise duty would result in an annual increase of government revenues by about Rs 39,000 crore. The gains during the remaining three weeks of the current fiscal would be less than Rs 2,000 crore.
SBI in a report said crude at $30/barrel could potentially lower petrol and diesel prices by Rs 10-12 per litre from their present prices, assuming the excise duty had stayed at the previous level. But the government may limit the fall in retail prices of the two petroleum products by increasing their excise duties.
“The rise in excise duty of Rs 3 on petrol and diesel prices by the Centre may lead to maximum cut of Rs 4.25 on petrol and Rs 3.75 on diesel from the current level. We thus expect the government may further limit such a fall in retail prices and thereby increase the excise more,” the SBI Ecowrap report said.
The country is staring at the highest ever tax collection shortfall, as corporate and income tax collection for this fiscal year is set to fall for the first time in at least two decades and the goods and services tax revenue could see a gaping shortfall.
The report highlighted the tough situation government faces in terms of managing fiscal deficit.