Softening crude may prompt Finance Minister to raise excise duty on petrol or diesel in the Budget

Concerns over the global economic impact of China-born Coronavirus kept the Indian market on the tenterhooks, too. Sensex shed over 458 points, the biggest this year. Crude oil prices fell 2.51% to $59.04 per barrel, keeping a tab on soaring rates of petrol and diesel.

However, the softening crude prices, just when the union budget is around the corner, may give a handle to the cash-strapped government to raise excise duty once again on February one.

On the currency front, the rupee depreciated over 10 paise to close at Rs 71.44 a US dollar. But the weaker rupee sent the haven assets soaring as gold climbed by Rs 133 to Rs 41,292 per 10 gram and silver prices too jumped Rs 238 to Rs 47,277 per kg.

Sources in the government said softening crude prices was a welcome respite during the budget.

Last time when the crude prices had softened from their highs when Finance Minister Nirmala Sitharaman had presented her first budget in July last year, she had welcomed the move and said during her budget speech that it gave her enough room to review duties before levying an additional excise duty and a cess of Re 1 each on petrol and diesel.

At present, the Centre charges an excise duty of Rs 17.98 per litre on petrol, while VAT levied by states is Rs 14.98. The overall price charged from dealers amounts to Rs 32.96 per litre.

In the case of diesel, the Centre charges Rs 13.83 per litre excise duty and Rs 9.47 per litre VAT. The price charged to dealers amounts to Rs 23.3 per litre.

Financial markets across the world turned volatile on concerns over the global economic impact of the coronavirus.

“The rising number of cases and lockdown of cities is likely will impact fuel demand in the country and will keep oil prices under pressure despite geopolitical tensions,” said Abans Group head Abhishek Bansal.

China is the world's second largest consumer of crude oil.

According to Kavita Chacko, Senior Economist at Care Ratings, the slowdown in China's oil demand could precipitate the global slowdown and further pressure the Indian economy and reflect on India's trade with China.