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21
May 2018
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GST
(The Total Investment & Insurance Solutions)
With
transport fuel prices in Delhi touching an all-time high, industry chambers,
Ficci and Assocham, on Monday called for the government to urgently reduce fuel
excise duties. It also urged the government to bring automobile fuels under the
purview of Goods and Services Tax (GST).
The
price of petrol per litre in Delhi on Monday under the dynamic pricing regime
touched a record high of Rs 76.57, already having beaten on Sunday the previous
high of Rs 76.06 in the city on September 14, 2013.
Diesel
in the national capital on Monday went to its highest level of Rs 67.57 per
litre.
Reacting
to the spiralling fuel price Oil Minister Dharmendra Pradhan on Sunday said the
government is "sensitive towards the rising fuel prices" and various
alternatives are being explored. "I hope something will work out
soon," he added.
"At
a time when the Indian economy is on a recovery path, rising oil prices are
again posing a high risk to India's economic growth trajectory," a Ficci
statement said here.
"Over
the last few years, falling oil prices contributed significantly towards
improving the health of the economy. With global oil prices once again
spiralling upwards, the macroeconomic risks of higher inflation, higher trade
deficit and pressure on balance of payments with attended consequences for the
Rupee value have once again surfaced," said Ficci President Rashesh Shah.
"There
is also a risk that monetary policy may turn hawkish, which would, in turn,
have a bearing on the growth of private investments," he said.
"While
cut in excise duty on petrol and diesel may provide temporary relief to the
consumers, the sustainable solution lies in the automobile fuel coming under
the Goods and Services Tax, which can happen only after the Centre and states
together reduce their dependence on the fuel considerably," said D S
Rawat, Secretary General of Assocham.
He
said , rising crude prices coupled with weaker rupee with cascading impact on
inflation pose "a big challenge for the Indian macro picture and
ironically, there is a little that can be done in the short term."
In
the long run, India needs to rework its energy security and ensure that petrol
and diesel do not remain a huge revenue resource. Rather than being a revenue
source for the government, the auto fuel should drive the economic growth,
Rawat added.
At
its first bi-monthly monetary policy review of the fiscal in April, the Reserve
Bank of India (RBI) retained its key interest rate at 6 per cent for the fourth
time in succession, citing rising oil prices as a major upside risk to retail
inflation that rules over the RBI's median target of 4 per cent.
"Unless
swift action is taken to address the situation, the economic growth will again
head towards a speed-breaker. Amongst the most immediate actions that can be
taken by the government is to bring down the excise duty on fuel," Shah
added.
He
pointed out that the government's latest Economic Survey 2017-18 has estimated
that for every $10 per barrel rise in crude prices, while GDP growth will
reduce by 0.2-0.3 percentage points, the current account deficit will increase
by 0.4 percentage points and wholesale inflation will go up by 1.7 percentage
points.
Ficci
also noted that when the global oil prices were down, the government had hiked
excise duty on fuel nine times between November 2014 and January 2016, but had
reduced it only once in October 2017.
"Given
that overall excise duties have been raised by as much as Rs 11.77 per litre
for petrol and Rs 13.47 per litre for diesel, while reduction has been mere Rs
2 per litre, there is a scope of bringing down the excise duties. While such a
move will have an implication on the fiscal revenues at this juncture there is
a need to do the fine balancing act," Shah said.
"As
per some estimates, every Re 1 per litre cut in excise duties results in
potential revenue losses of Rs 130 billion (0.1 per cent of GDP). On the
positive side, GST collections are edging up and if the government focuses on
increasing disinvestment proceeds, revenue losses from excise can be
mitigated," he said.
"Going
forward, the government should also work with the states to bring petrol
products under the GST regime," he added.
Over
the long term, there is a need for a strategic policy towards reducing India's
reliance on oil, entering into strategic partnerships with global oil suppliers
"and evaluate forming a global consumer alliance along with other leading
consumers of oil like China", Ficci said.
The
price of the Indian basket of crude oils, composed of 70 per cent sour grade
Oman and Dubai crudes and the rest by sweet grade Brent, has gone upwards of
$72 a barrel in May, after rising to an average of $69.30 in April 2018.
It
averaged $47.56 and $56.43 per barrel respectively during the last two
financial years.The Total Investment & Insurance
Solutions
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