The Finance Ministry is considering cutting excise duties on petrol and diesel to cushion the impact of record-high domestic prices, the government officials close to the discussions told news agency Reuters.
Reuters quoted sources as saying that the Finance Ministry has now started consultations with some states, oil companies and the Oil Ministry to find the most effective way to lower the tax burden on the consumers without federal finances taking a big hit.
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“We are discussing ways in which prices can be kept stable. We will be able to take a view of the issue by mid-March,” the international news organisation quoted one of the sources as saying.
Sources further said the government wants oil prices to stabilise before cutting taxes, as the ruling dispensation does not want to be forced to change the tax structure again, should crude prices rise further.
“There is an expectation that OPEC+ would agree to ease oil output curbs, we hope oil prices will stabilise after their decision,” one of the sources said.
With the prices of petrol and diesel rising sharply in recent days, Union Finance Minister Nirmala Sitharaman had recently said that the Centre and states should talk to each other about reducing taxes on fuel.
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Responding to a poser on whether the Centre was thinking about reducing cess or other taxes on fuel, she said: “I agree that there should be less burden on the consumers. For that, both the Centre and states should talk with each other.”
With the coronavirus pandemic hitting economic activity, the Centre twice raised taxes on petrol and diesel in the last 12 months to boost sagging tax revenues instead of passing on the benefits of low oil prices last year to the consumers.
The high fuel prices have prompted some Indian states to cut state-level taxes on petrol and diesel to rein in prices.