Finance Minister Nirmala Sitharaman on Monday ruled out a cut in excise duty on petrol and diesel to ease prices, which have touched an all-time high, saying payments in lieu of past subsidised fuel pose limitations.
Petrol and diesel as well as cooking gas and kerosene were sold at subsidised rates during the previous Congress-led UPA government. Instead of paying for the subsidy to bring parity between the artificially suppressed retail selling price and the cost that had soared because of international rates crossing USD 100 per barrel, the then government issued oil bonds totalling Rs 1.34 lakh crore to the state-fuel retailers. These oil bonds and the interest thereon are being paid now.
“If I did not have the burden to service the oil bonds, I would have been in a position to reduce excise duty on fuel,” she told reporters here.
“Previous government have made our job difficult by issuing oil bonds. Even if I want to do something I am paying through my nose for the oil bonds.”
Sitharaman, who had raised excise duty on petrol and diesel to record high to shore up revenue collections last year, said the interest on oil bonds paid in the last seven years totalled Rs 70,195.72 crore.
Of the Rs 1.34 lakh crore of oil bonds, only Rs 3,500 crore of principal has been paid and the remaining Rs 1.3 lakh crore is due for repayment between this fiscal and 2025-26, she said.
The government has to repay Rs 10,000 crore this fiscal year (2021-22). Another Rs 31,150 crore is due to be repaid in 2023-24, Rs 52,860.17 crore in the following year and Rs 36,913 crore in 2025-26.
“A significant amount is going for interest payment and principal repayment. What unfair burden on me,” she said.
“Opening balance in 2014-15 was about Rs 1.34 lakh crore and interest repayment was Rs 10,255 crore. Since 2015-16, interest burden each year is Rs 9,989 crore.”
The collections from the hike in excise duty far exceed the amount due to be paid to oil companies.
Excise duty on petrol was hiked from Rs 19.98 per litre to Rs 32.9 last year to recoup gain arising from international oil prices plunging to multi-year low as pandemic gulped demand.
Minister of State for Petroleum and Natural Gas Rameswar Teli had last month told Parliament that the Union government’s tax collections on petrol and diesel jumped by 88 per cent to Rs 3.35 lakh crore in the year to March 31 from Rs 1.78 lakh crore a year back. Excise collection in pre-pandemic 2018-19 was Rs 2.13 lakh crore.
The hike in taxes last year did not result in any revision in retail prices as they got adjusted against the reduction that was warranted because of fall in international oil prices.
But with the demand returning, international oil prices have soared, which have translated to record high petrol and diesel prices across the country.
More than half the country has petrol at over Rs 100-a-litre mark and diesel is above that level in Rajasthan, Madhya Pradesh and Odisha.
Sitharaman said the Centre has kept open the option of inclusion of petroleum products under the Goods and Services Tax (GST) regime. “Whenever states agree on this, it can be brought under the GST.”
Inclusion under GST would mean subsuming of excise duty and VAT (levied by states) into one tax. This would help contain the cascading impact of tax-on-tax (VAT being levied on excise duty).