India lowers fuel taxes for the holiday season to boost economy

A worker cleans a pump at a gas station in Ahmedabad, India, May 14, 2018. REUTERS / Amit Dave

NEW DELHI, Nov. 3 (Reuters) – The Indian government on Wednesday reduced taxes on gasoline and diesel in an effort to improve consumer sentiment as Asia’s third-largest economy recovers from the shocks of severe lockdowns over the spread of it. to check coronavirus.

Excise duty on petrol has been reduced by 5 rupees ($ 0.0671) per liter, and that on diesel by 10 rupees ($ 0.1342) per liter, the government said in a statement.

The tax break comes on the eve of the Diwali Hindu festival, which marks the beginning of a busy holiday season in India, typically marked by increased consumer spending.

The federal government will have to deal with a loss of revenue of between 550 billion rupees ($ 7.38 billion) and 600 billion rupees from the tax cut, a government source told Reuters, refusing to be named because it detail is not public.

The past few months have witnessed a steady growth in consumer spending in India with a spike in curbs on travel and business operations due to a dip in the number of coronavirus cases.

But high fuel prices have damaged the margins of businesses and farmers, which make a significant contribution to the economy. The fuel tax cut is likely to come as a boost to manufacturers and farmers.

“Given that inflation expectations are building up, there was a need to review the tax component,” said NR Bhanumurthy, economist and vice-chancellor at BR Ambedkar School of Economics based in Bengaluru. “This will cool the inflation outlook to some extent., Which will warn well for continued growth of GDP (gross domestic product).

India, the third largest oil importer and consumer in the world, ships about 85% of its oil needs from abroad.

Spiked global oil prices this month have pushed retail prices of petrol and diesel in India to a record high.

Global oil prices rose to $ 86.40 a barrel in October. 26 – the highest since Oct. 2014 – Destroyed by the hit to economies of the COVID-19 pandemic, though it has since declined to about $ 82.5 per barrel.

Taxes are a big part of fuel prices in India: one liter of petrol comes to 110.04 rupees, while diesel comes to 98.42 rupees in Delhi. Before the cuts announced on Wednesday, taxes made up about 52% of the price of petrol and about 47% of that of diesel. ($ 1 = 74.5400 Indian rupees)

($ 1 = 74.5240 Indian rupees)

Written by Zeba Siddiqui in NEW DELHI; Edited by Alex Richardson and Giles Elgood

Our standards: The Thomson Reuters Trust Principles.

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