[EXCLUSIVE] Oil Ministry not hopeful on relaxations in fuel price in the Union Budget

With just two days to Union Budget, ET Now learns that Oil ministry is not hopeful of an excise duty cut on fuel prices even as petrol and diesel prices are at an all-time high.  Sources also tell ET Now that the ministry is not expecting waiver of cess and royalty announcement anytime soon. This could pin down hopes of the sector and oil exploration co’s who have been expecting relief.

The government has a tough choice to decide on whether they should be giving the excise tax cut as the retail fuel prices will hurt the economy in other ways. While a higher fuel price may earn more revenue for the government, it can also lead to higher inflation. Similarly, a lower fuel price may keep inflation under check but shall bring a hindrance to the Centre on the revenue front.

In the wake of financial turmoil caused by Covid-19, the oil and gas industry have high hopes in terms of fiscal stimulus and removing tax inconsistencies from Budget 2021. Industry stakeholders have already requested the government to reduce excise duty, and VAT on fuel prices due to higher crude oil prices. OMC’s have also written to the government to waive oil development cess and royalty charge due to the distress caused by the pandemic.

Sources tell ET Now that the Oil Ministry is not hopeful of relief being granted to the sector in terms of a tax cut. The centre is likely to allocate Rs 15,000 crore budget to the sector that could be utilized for LPG Subsidies and PDH Pipelines work. The budget allocated to the sector is likely to be less than the amount allocated in previous years.