The central government has reduced excise duty on petrol and diesel alongside a series of steps intended to bring down inflation in the economy. The government will also set aside more funds to subsidise fertilisers and gas cylinders to reduce the impact of higher prices.
The measures, detailed by Finance Minister Nirmala Sitharaman in a series of tweets on Saturday, come as retail inflation in the economy hit an eight-year high and wholesale inflation hit a three-decade high.
Bringing Down Fuel Costs
Excise duties on petrol and diesel have been cut by Rs 8/litre and Rs 6/litre respectively.
“This will reduce the price of petrol by Rs 9.5 per litre and of diesel by Rs 7 per litre,” Sitaraman said. “It will have revenue implication of around Rs 1 lakh crore/year for the government.”
Currently, the excise duty on one litre of petrol in Delhi comes to Rs 27.90 and on diesel the duty comes to Rs 21.80.
The Centre will also extend a subsidy of Rs 200 per LPG cylinder (up to 12 units) to over 9 crore beneficiaries of the Pradhan Mantri Ujjwala Yojana.
The cut in excise duties will help cool inflation and complement monetary policy, ICRA’s Chief Economist Aditi Nayar said.
“We project the May 2022 CPI inflation at 6.5-7.0%. The fiscal cost, while non-material, can be absorbed by higher than budgeted revenues through other taxes,” Nayar said. “We now estimate the tax revenues of the GoI to surpass the budget estimates by Rs 1.3 trillion even after the excise duty reduction.”
Increase In Fertiliser Subsidy
Sitharaman added that the government will set aside more funds to subsidise fertiliser requirements for farmers. An additional amount of Rs 1.10 lakh crore is also being set aside for fertiliser subsidy, the finance minister said.
The government has already raised fertiliser subsidy once and budgeted over Rs 1 lakh crore for it this year.
Cutting Customs Duty
Customs duty cuts have also been anounced.
“We are also reducing the customs duty on raw materials & intermediaries for plastic products where our import dependence is high,” Sitharaman said. “This will result in reduction of cost of final products.”
Duties will also be cut for inputs of iron and steel. Alongside, availability of cement and bringing down logistic costs will also be a focus.
