Petrol and diesel prices are set to cost more as government is likely to hike excise duty on petrol and diesel before March for boosting revenue and meet its fiscal deficit target.
New Delhi: The government is looking at one more hike in excise duty on petrol and diesel before March with a view to raising more revenue and stick to the fiscal deficit target of 3.9 percent of the GDP.
"Fiscal deficit target of 3.9 percent for the current fiscal is sacrosanct and various options are available before the government, including further raising excise duty on petrol and diesel," official sources said.
Government has already raised excise duty on petrol and diesel, three times in quick succession, which will help it garner an additional Rs 10,000 crore in the fiscal and partly make up for the shortfall in disinvestment receipts and direct tax collections.
"If global crude oil price provide room for further duty hike, it can be done. The government is open to idea as it will help boost revenue," sources said.
Last week, the government hiked excise duty on petrol by Rs 0.37 per litre and by Rs 2 a litre on diesel to mop up a little less than Rs 4,400 crore.
Oil prices have already fell to 12-year low to USD 32 per barrel on concerns of weak Chinese economy.
The higher realisation from further excise duty hike will come handy to the government to maintain fiscal deficit at 3.9 percent of GDP in current financial year ending March 2016, notwithstanding poor showing with regard to stake sale in state-owned companies.
Although the government has targeted to raise Rs 69,500 crore from PSU disinvestment in current fiscal, so far only Rs 12,700 crore has been raised and the likelihood of any major stake sale in the remaining three months of 2015-16 is bleak.
Finance Ministry officials have admitted that there would be a shortfall of around Rs 50,000 crore in disinvestment proceeds and about Rs 30,000-40,000 crore in direct taxes, but expressed optimism that higher realisation from indirect taxes as well as non-tax revenues will make up for the deficit.
The Ministry is also insisting on higher dividends from the PSUs in a bid to garner more non-tax revenue.
The government has raised excise duty on petrol and diesel three times in last two months and by seven times since November 2014. The three excise duty hikes this fiscal, totalling Rs 2.27 per litre on petrol and Rs 3.47 a litre on diesel.
Taken together with four excise duty hikes between November 2014 and January 2015, levies on petrol has gone up by Rs 10.02 a litre and that on diesel by Rs 9.97 per litre.
According to the data, fiscal deficit position has shown a marked improvement at the end of November 2015. The deficit stood at Rs 4.83 lakh crore, or 87 percent of the Budget Estimate (BE) for the whole 2015-16. The fiscal situation, however, is better than last year when the deficit was 98.9 percent of the BE for the same period.