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Cut in fuel excise duty to cost govt Rs 45k cr: Report


MUMBAI: The excise duty cuts on diesel and petrol will cost Rs 45,000 crore and lead to a 0.3 percentage point widening in the Centre’s fiscal deficit, a foreign brokerage said on Thursday. Going by the overall consumption, the cost of the surprise move, which came after months of concerns over high payouts at filling stations, for the entire fiscal will come to Rs 1 lakh crore, or 0.6% of GDP, economists at Japanese brokerage Nomura said in a report. For the remaining months of the ongoing FY22, the cost will be Rs 45,000 crore, which leads to an upward review of the fiscal deficit target. The brokerage said it now expects the fiscal deficit to be 6.5% as against the earlier expectation of 6.2% and underlined that it will still be lower than the budgeted 6.8% target. The central government on Wednesday announced a cut in excise duty on petrol by Rs 5 per litre and diesel by Rs 10 per litre on the eve of Diwali. The move only partly reverses the hike in duties in 2020 by Rs 13 per litre for petrol and Rs 16 per litre on diesel, following a steep drop in oil prices, and comes on the heels of higher crude prices pushing retail prices to record highs, it said. The brokerage said “parsimonious” spending by the government so far this fiscal has helped limit fiscal deficit in H1FY22 to 35% of the budgeted target, compared with a 15% overspend of the budget in H1FY21. The tax cuts should lower headline CPI inflation by 0.14 percentage points due to direct effects and up to 0.3 percentage points if indirect effects are included. But there are offsets from elevated input costs, reopening pressures and an ongoing energy crunch, it said. Politically, high inflation remains one of the top concerns for voters, it said.


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