Can Modi government bring the petrol prices down by Rs 25? Here's the real story

Petrol prices are at an all-time high in the Indian cities and so is the case with diesel. The primary reason behind the exorbitant prices being the spike in crude oil rates that add up with extremely high taxes and excise duties.

The current Narendra Modi regime has gained significantly in the past two years, the prices of the crude oil were extremely low that allowed the government to raise the excise duty 9 times. Now that the international market prices of the crude oil again getting back to normal, the effective price has seen an unbearable surge and the demands of bringing the taxes down have again come into the limelight so much so that the former Finance Minister P. Chidambaram has went on to say that the prices of the petrol can be brought down by Rs 25 per litre.

But the economic experts say that it is not possible.The Narendra Modi government has a fiscal deficit target of 3.2% for the fiscal year 2018-19. “Rising crude oil price, in itself, is going to have an impact on government’s fiscal deficit. On top of it, an excise duty cut is going to bloat it to at least 3.5%,” Anjali Gupta, said Chief Economist at PhillipCapital India.

The government freed petrol price from its control in June 2010 and began deregulating diesel in October 2014. Until June 2015, the government subsidised India’s oil refiners and marketers such as Indian Oil, HPCL and BPCL. It asked oil producers such as ONGC to share the subsidy burden, but stopped after that as global oil prices plummeted. But the risk of them (oil producing companies) being asked to once again bear a part of the subsidy is looming with the recent rise in international oil rates, Moody’s said in a report.

There are also talks about bringing petrol and diesel under the ambit of GST and CARE Ratings report has said that the decision to bring these two commodities should be considered seriously,“With the sharp recovery of crude oil prices globally and with the increase in the prices of the auto fuels, the inclusion of petrol and diesel under the GST will help in rationalising the prices of these auto fuels,” it said.

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