The Centre may revise the FY24 excise duty collection target downwards by Rs 45,000 crore, factoring in some possible fiscal support if crude oil prices continue to remain elevated, people familiar with deliberations told ET.
This revision is not likely to impact the overall revenue mop-up as the other resources may make up for the shortfall.
“Excise collection target may be revised downwards in the revised estimates by about Rs 45,000 crore than in BE (budget estimates),” a senior finance ministry official said.
A final call on any reduction would be taken at the highest political level.
The Centre is starting the budgetary exercise from next week.
The official added that Union excise collection is already lower than anticipated and the Centre also wants to take into account higher international crude prices. “We are keeping a close watch on the oil prices… There is no immediate concern but going forward we are budgeting for some headroom to absorb any future shock,” the official added.
The Cabinet on Wednesday raised the domestic cooking gas subsidy for Ujjwala scheme beneficiaries by Rs 100 per cylinder to Rs 300. The government is also expected to cut taxes on fuels to lower prices ahead of the upcoming state elections and the general elections in the 2024 summer.
Brent crude was trading near $90 a barrel on Thursday, down from the near one-year high of $94.36 a barrel on September 27.
Chief economic advisor V Anantha Nageswaran told ET earlier this week that if crude moves above $100 and crosses $110 it will be a challenge.
Pump prices of petrol and diesel were last revised in May 2022 when excise duty on petrol and diesel was cut by Rs 8 a litre and Rs 6 a litre, respectively.
Oil marketing companies have been absorbing the fluctuation in crude prices. In FY23, the government paid Rs 22,000 crore to the state-run oil retailers for selling fuel below cost.
Excise collections
The central government’s collections from excise duties have been pegged at Rs 3.39 lakh crore for the current fiscal, up by nearly 6% over the revised estimates last financial year.
In the last fiscal, the Centre had pegged excise collection to be Rs 3.35 lakh crore, later revising it downwards by Rs 15,000 crore to Rs 3.20 lakh crore.
In April-August, collections were down 12.4% from a year earlier.
“The Centre may want to keep a buffer for the future in case crude prices stay high. And this is natural as they may not pass the whole burden on oil marketing companies and may go for duty reduction,” said Madan Sabnavis, chief economist, Bank of Baroda.
