Petrol and diesel prices cut in India with new tax plans - Energy

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New Delhi has a special mission; To save its citizens from the effects of high gasoline and diesel prices in India, through new decisions to reduce them, by giving up part of the revenue in favor of fuel tax subsidies, at a time when the country is facing unprecedented inflation.

The new approach is likely to cost India’s state treasury about 1 trillion rupees ($12.9 billion) that the Asian country will allocate to subsidize fuel surcharges, reducing the tax by about 8 rupees ($0.1028) per liter of gasoline, and 6 rupees per liter of diesel, according to Bloomberg. sources.

The state treasury has incurred huge losses due to the recent cuts in petrol and diesel prices in India; So there is a tendency to burden the market with a portion of these losses; The debt escalation is likely to raise concerns in the bond market in India, according to data seen by the specialized energy platform.

The benchmark 10-year bond yields rose over the past month; The Reserve Bank of India, which is running a record borrowing scheme, surprised investors with an emergency new rate hike.

Price cut plans

Petrol and diesel prices in India
Indians at a gas station – Photo by Bloomberg

Over the weekend, the central government lowered duties on petrol and diesel prices in India, eliminated import tax on coke and raised payments for fertilizer and cooking gas to the poor, according to Finance Minister Nirmala Sitharaman.

The revenue loss comes at a time when investors await a record borrowing program from the government, and price pressures are mounting; This is reflected in the wholesale and consumer price index, and increases the chances of sharp increases in interest rates by the central bank.

India’s budgets aim to raise around Rs 14.3 crore, through debt issuance in this fiscal year until March 2023; Whereas, the borrowings were made in the local currency; Because banks and insurance companies are the biggest buyers of sovereign debt.

Barclays plc’s chief Indian economist, Rahul Bagoria, is raising his budget deficit estimates; India’s budget gap is expected to be 6.9% for the 2022-2023 fiscal year, beating New Delhi’s forecast of 6.4% of GDP.

Petrol and diesel prices in India

Although the government has provided subsidies on petrol and diesel prices in India; Gasoline is currently priced at 105.41 rupees ($1.35) per liter, while diesel is 96.67 rupees ($1.24) in New Delhi, according to a price plan seen by the specialist energy platform.

The Indian government is set to provide a new subsidy of up to 200 rupees ($2.6) per cylinder of cooking gas to more than 90 million beneficiaries, under the social welfare scheme for women below the poverty line.

India’s Finance Minister Nirmala Sitharaman said the subsidy would have an annual revenue impact of around 61 billion Indian rupees, adding: “Prime Minister Narendra Modi specifically asked all arms of the government to act with sensitivity and comfort the common man.”

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