Will the govt cut excise duty to to lower petrol, diesel prices?
The government saw no real impact on its fiscal situation and subsidy bills, Expenditure Secretary S C Gard said recently. “There is no reason for us to believe there will be any great impact on the fiscal deficit. We will continue to ensure that there is no adverse impact on fiscal deficit.” Asked if the government would cut the excise duty on petrol and diesel, he said: “Just watch. There has been adjustment to the prices in past few days. What does that indicate?” Excise duties account for a fourth of retail selling price of the fuels.
Is the onus of reducing prices on states?
When the upward march of crude oil prices had only just begun, the petroleum & natural gas and finance ministries had said that states should agree to bring five petroleum products -- natural gas, petrol, diesel and aviation turbine fuel (ATF) and crude oil -- under the goods and service tax (GST). Finance Minister Arun Jaitley had also said that states should cut other tax levied on petrol and diesel, while Finance Secretary Hasmukh Adhia (currently on leave) had ruled out any cut in central excise duty, which had been increased steadily over two financial years until March 2017, when the global prices were low. “We share the tax kitty collected through increases with the states,” the finance ministry said more than once.
Is oil the new monsoon?
Earlier, the Indian economy and the political climate were dependent on monsoon. A bad monsoon meant a bad year for the economy and the government, and vice versa. The central governments led by Atal Bihari Vajpayee and Rajiv Gandhi in the past, for example, were badly hurt by years of poor monsoon . Over the decades, however, things have changed a lot. Prime Minister Narendra Modi for one has survived two bad monsoons.
In today's time, the global price of crude oil makes or breaks fiscal years and the reputation of political parties. High crude oil prices, like the one the UPA government suffered in its second term, lead to unrest about inflation, accusations of corruption, and constrained growth. A year before the Lok Sabha elections, the present central government under Narendra Modi would like to avoid these.
CLSA's Chris Wood sees rising crude oil prices as a key threat to Indian equities
The main risk to investors in Indian equities, from a dollar return perspective, remains the rising oil price, wrote CLSA managing director and equity strategist Christopher Wood in his weekly note GREED & fear. Prices for global benchmark Brent crude shot above $80 a barrel Thursday, as Washington’s decision to reinstate sanctions on Iran extended a rally that has pushed the market to their highest level since 2014. In the past one year alone, Brent oil price has flared over 56 per cent, data shows.