SBI research arm feels States have leeway to cut petrol, diesel prices
The research arm said that these revenue, if foregone, would not impact states fiscal position.
The research arm said that these revenue, if foregone, would not impact states fiscal position.
States have the leeway to cut petrol prices by ₹ 2.65 a litre and diesel by ₹ 2 a litre without any impact to their fiscal position, research arm of State Bank of India said.
“Our analysis shows that at the current crude prices, and extending our analysis to 19 states (overall consumption share is 93% both in petrol and diesel), the states could have gained at least an additional ₹ 18,728 crore of revenue, based on an average crude oil basket of around $72 / barrel for FY19,” SBI Research said in a report.
This translated into an additional revenue of ₹ 2,675 crore over and above the budget estimates of States revenue for every $1/ barrel increase in oil prices, it added.
The research arm said that these revenue, if foregone, would not impact states fiscal position.
“We estimate that, on an average, states can cut petrol prices by ₹2.65 /litre and diesel by ₹ 2/ litre, if the entire revenue gain was to be neutralised. This is the most plausible scenario under the current circumstances,” it added.
SBI Research noted that one suggestion to further rationalise the petrol and diesel prices was to consider a pricing mechanism where value added tax was imposed on base price only by states and not on prices inclusive of Centre’s tax.
“If this was the case, diesel prices could further reduce by ₹3.75 /litre and petrol prices by ₹5.75/ litre. However, if this was to happen, the State will have to forego ₹ 34,627 crore of tax revenue / 0.2% of consolidated fiscal deficit of states. This will be a permanent loss of revenue to states,” it added.
The firm said Centre charges a fixed excise duty of ₹19.48 per litre on petrol and ₹15.33 per litre on diesel. However, a big part of the price rise comes from the State side, it added.
If the Centre cuts the excise by Re 1, the loss of revenue would be to the tune of ₹ 10,725 crore for every Re 1 cut in Central Excise and the amount will become twice if it cuts the excise duty by ₹2. This would push up the deficit of Centre, unlike states, it added.
from The Hindu - Business https://ift.tt/2GXmQSn
The research arm said that these revenue, if foregone, would not impact states fiscal position.
States have the leeway to cut petrol prices by ₹ 2.65 a litre and diesel by ₹ 2 a litre without any impact to their fiscal position, research arm of State Bank of India said.
“Our analysis shows that at the current crude prices, and extending our analysis to 19 states (overall consumption share is 93% both in petrol and diesel), the states could have gained at least an additional ₹ 18,728 crore of revenue, based on an average crude oil basket of around $72 / barrel for FY19,” SBI Research said in a report.
This translated into an additional revenue of ₹ 2,675 crore over and above the budget estimates of States revenue for every $1/ barrel increase in oil prices, it added.
The research arm said that these revenue, if foregone, would not impact states fiscal position.
“We estimate that, on an average, states can cut petrol prices by ₹2.65 /litre and diesel by ₹ 2/ litre, if the entire revenue gain was to be neutralised. This is the most plausible scenario under the current circumstances,” it added.
SBI Research noted that one suggestion to further rationalise the petrol and diesel prices was to consider a pricing mechanism where value added tax was imposed on base price only by states and not on prices inclusive of Centre’s tax.
“If this was the case, diesel prices could further reduce by ₹3.75 /litre and petrol prices by ₹5.75/ litre. However, if this was to happen, the State will have to forego ₹ 34,627 crore of tax revenue / 0.2% of consolidated fiscal deficit of states. This will be a permanent loss of revenue to states,” it added.
The firm said Centre charges a fixed excise duty of ₹19.48 per litre on petrol and ₹15.33 per litre on diesel. However, a big part of the price rise comes from the State side, it added.
If the Centre cuts the excise by Re 1, the loss of revenue would be to the tune of ₹ 10,725 crore for every Re 1 cut in Central Excise and the amount will become twice if it cuts the excise duty by ₹2. This would push up the deficit of Centre, unlike states, it added.
from The Hindu - Business https://ift.tt/2GXmQSn
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