PHD Chamber suggests reduction in state levies on petrol and diesel

A slew of measures announced by the government including an increase in fuel prices - by Rs 5 per litre in the case of petrol, Rs 3 per litre of diesel and Rs.50 on LPG cylinder - is on expected lines and will help oil companies to cut losses on sale of petrol, diesel and LPG. 

Given the hike in global oil prices, which touched an all time high of $135 per barrel, the adjustment of domestic retail price had become inevitable to help contain, to some extent, the staggering revenue losses made by oil marketing companies estimated at Rs. 2,46,000 crore in this fiscal due to under recoveries made by oil companies. 

The hardening of fuel prices would, doubtless, have a cascading effect on the economy which is certain to fuel inflation, which is already ruling at 8 per cent.  Hence the government has done well to simultaneously announce excise and customs duty cuts on petroleum and diesel to mitigate the impact of the hike.  However, the government should have used this opportunity to end cross subsidization of Kerosene as well.  The poor could be subsidized directly though income coupons or food stamps.  Besides, state levies on petrol and diesel also need to be reduced to subdue the impact of the petrol and diesel price hike on industry and economy