Budget 2018: Fuel bill gets tax cut, but can’t escape cesspool

NEW DELHI: You’ll have to wait for the global oil market to cool off before your fuel bill comes down.

The Budget pared excise duty on petrol and diesel, but took away the benefit by raising cess by an equal amount. So there’s neither a Budget shock nor cheer for motorists.

In other words, if pump prices aren’t jumping on higher cess, they aren’t coming down either because of the excise cut. This means you’ll have to continue to pay more for motor fuels in tune with rising global crude prices.

The Budget reduced the basic excise duty by Rs 2 a litre to Rs 4.48 on petrol and Rs 6.33 on diesel. But at the same time, the road cess, also described as additional excise duty, was rechristened ‘road and infrastructure cess’ and raised by Rs 2 to Rs 8 a litre on both fuels. There’s a view in the industry that a lower excise duty will help pare pump prices if crude cools off in the days ahead.

This will depend on whether the road cess is being levied as a percentage of the price. Deloitte’s Debasish Mishra also sees an upside. “The excise cut signals that the government does not want consumers to pay beyond current levels of retail prices and pricing deregulation is here to stay.

This sends a strong signal to investors that the Modi government’s reform measures are for the long term,” he said.

In the meantime, consumers are sure to fret over the fact that the government had cumulatively raised excise duty on petrol by Rs 11.77 per litre and on diesel by Rs 13.47 a litre between November 2014 and January 2016, taking advantage of global oil prices dipping to $30/barrel levels.

But fuel bills have been steadily rising since August last year as global oil prices rebounded on a production cut deal between Opec and other major producers such as Russia that sucked out excess supply in the market.

Crude has jumped to $70/barrel level since Opec and Russia on November 30 extended the production cut deal by a year.

This has pushed pump prices to record highs in many cities, with petrol price hitting Rs 80 a litre in Mumbai. Public anger too has risen on the government’s refusal to cut excise further after last year’s reduction of Rs 2 announced on October 3.

The government has steadfastly maintained that it has done its bit and it was now for states to reduce VAT.

Alternately, it wants motor fuels to be brought under GST, which will then do away with excise duty. After the Centre reduced excise in October, only five states reduced VAT, while the debate over bringing fuels under GST continues.

Congress had made the high excise duty on fuels and rising pump prices an issue in the last session of Parliament.