InvestorQ : How will the government fund its excise duty cut for petrol and diesel?
Anjana Aiyar made post

How will the government fund its excise duty cut for petrol and diesel?

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Khushi Patel answered.
9 months ago
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In a second round of excise cuts after November 2021, the government cut excise duties on diesel by Rs6 per litre and on petrol by Rs8 per litre to bring down the market prices of fuels in India. However, this recent cut in excise on petrol and diesel, combined with the cut in November will lead to loss of revenues to the government of more than Rs210,000 crore per annum. To begin with, government plans to borrow an additional Rs100,000 crore this year.

The good news is that the government witnessed higher collections on GST and also on personal income taxes. However, that has also been offset by sharply higher food and fertilizer subsidies in FY23. Now with 2 excise cuts on oil leading to revenue foregone of Rs210,000 crore, additional borrowings is the only answer. Fiscal deficit may be an issue as Barclays warns that fiscal deficit could touch 6.9% against the budget forecast of 6.4%.

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