To offset fuel excise duty cut, Centre may borrow ₹1 lakh crore: Report
A day after the Union government announced a reduction in excise duty on petrol and diesel, a report said that it may borrow the entire ₹1 lakh crore which will be the revenue implication due to the cut in levies.
On Saturday (May 21), Union Finance Minister Nirmala Sitharaman announced that the central excise duty on petrol will be cut by ₹8 per litre on petrol and ₹6 per litre on diesel. This will see the government foregoing a revenue of ₹1 lakh crore per year, she said.
“We are reducing the Central excise duty on Petrol by ₹ 8 per litre and on Diesel by ₹ 6 per litre. This will reduce the price of petrol by ₹ 9.5 per litre and of Diesel by ₹ 7 per litre. It will have revenue implication of around ₹ 1 lakh crore/year for the government,” Sitharaman tweeted.
On Sunday, she said the entire duty reduction in fuel taxes is being implemented out of the Road & Infrastructure Cess (RIC) component of the taxes levied on petroleum products.
Hence, the entire burden of the tax cuts will be borne by the Centre, with little impact on state revenues, she added.
According to a Bloomberg report on Sunday, people familiar with the matter said that the Centre will probably borrow the entire ₹1 lakh crore.
7/12 We are reducing the Central excise duty on Petrol by ₹ 8 per litre and on Diesel by ₹ 6 per litre.
This will reduce the price of petrol by ₹ 9.5 per litre and of Diesel by ₹ 7 per litre.It will have revenue implication of around ₹ 1 lakh crore/year for the government.
— Nirmala Sitharaman (@nsitharaman) May 21, 2022
Higher collections from the goods and services tax as well as personal income taxes will be neutralised by additional spending on food and fertiliser subsidies that the government is giving to the poor and farmers, said the people, who declined to be identified as the discussions are private, the report added.
The loss to the exchequer due to the recent excise duty cuts will therefore have to be borne through additional market borrowings, the people said.
Also read: Burden of fuel tax cuts fully borne by Centre: Nirmala Sitharaman
Sitharaman also announced subsidy on gas cylinders to over nine crore beneficiaries of Pradhan Mantri Ujjwala Yojana, besides subsidy on fertilisers.
“Also, this year, we will give a subsidy of ₹ 200 per gas cylinder (upto 12 cylinders) to over 9 crore beneficiaries of Pradhan Mantri Ujjwala Yojana. This will help our mothers and sisters. This will have a revenue implication of around ₹ 6100 crore a year,” she said.
9/12 Also, this year, we will give a subsidy of ₹ 200 per gas cylinder (upto 12 cylinders) to over 9 crore beneficiaries of Pradhan Mantri Ujjwala Yojana. This will help our mothers and sisters. This will have a revenue implication of around ₹ 6100 crore a year. #Ujjwala
— Nirmala Sitharaman (@nsitharaman) May 21, 2022
“Despite rising fertilizer prices globally, we have protected our farmers from such price hikes. In addition to the fertilizer subsidy of ₹ 1.05 lakh crore in the budget, an additional amount of ₹ 1.10 lakh crore is being provided to further cushion our farmers,” she added.
5/12 Despite rising fertilizer prices globally, we have protected our farmers from such price hikes. In addition to the fertilizer subsidy of ₹ 1.05 lakh crore in the budget, an additional amount of ₹ 1.10 lakh crore is being provided to further cushion our farmers.
— Nirmala Sitharaman (@nsitharaman) May 21, 2022
The revenue loss comes at a time when investors are staring at a record borrowing program from the government, surging price pressures as reflected in the wholesale and consumer price index, and the prospect of sharp interest rate increases by the central bank, the report said.
The government aims to raise about Rs 14.3 lakh crore through debt issuances in this financial year through March 2023, it added.
