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Centre may cut auto fuel taxes by Rs 5/ltr: BofA

NEW DELHI, FEB 25 (AGENCIES) | Publish Date: 2/25/2021 12:53:09 PM IST

Centre may cut fuel taxes by Rs 5/litre to ease pressure on consumers as average price of global crude oil is seen to be around $60 per barrel, analysts at Bank of America (BofA) said.

“We have raised our FY22 Center’s fiscal deficit by 30 basis points to 7.5% of GDP, expecting Rs.5 per litre oil tax cut,” BofA was quoted as saying by The Financial Express. The Rs 5/litre tax cut can reduce Centre’s income by around Rs 71,760 crore.

The price of Indian basket of crude is currently at $62/barrel, up from $50/barrel in mid-December, supported by global demand recovery and voluntary production cuts from major oil exporting nations. Owing to lower demand, Indian basket of crude prices were in the range of $19-$44/barrel in the first half of FY21, when crude import bill fell 57% annually to $22.5 billion. “We have retained our 9% FY22 growth forecast with the boost to consumption from oil tax cuts likely to offset impact of the pressure on yields from a higher fiscal deficit,” BofA added.

The brokerage firm has raised its RBI open market operations forecast by $9 billion to $48 billion, with oil imports driving up the current account deficit.

Meanwhile, Union Finance Minister Nirmala Sitharaman and RBI Governor Shaktikanta Das Thursday said the Centre and states should talk and look for a “coordinated action” over reducing taxes on diesel and petrol whose prices have risen sharply in the recent weeks.

As the political protests against the mounting fuel prices took different forms, Sitharaman also said the question during an interaction with students asking if the Centre is mulling reducing cess or other taxes on fuel to give some respite to consumers has put her in “dharm-sankat” (dilemma).

 

-Tags:#BofA

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