No cut in excise duty on petrol, diesel; tweak in rates to accommodate agri cess

Instead, her Budget FY22 tweaked excise duty structure to accommodate an agriculture infrastructure development cess

Petrol and diesel prices will not be cut as Finance Minister Nirmala Sitharaman ignored calls for a reduction in excise duty rates to help bring down prices from historic high levels.

Instead, her Budget for the 2021-22 fiscal tweaked excise duty structure to accommodate an agriculture infrastructure development cess, whose accruals would not be shared with the states.

Besides the tweak, the Budget proposed monetisation of oil and gas pipelines of gas utility GAIL and oil refiners Indian Oil Corporation (IOC) and Hindustan Petroleum Corporation Ltd (HPCL).

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Ujjwala scheme of providing free cooking gas to poor women will be extended to 1 crore more beneficiaries.

A gas pipeline to Jammu and Kashmir as well as setting up of an independent gas transport system operator (TSO) also form part of the budget.

Sitharaman in the Budget imposed a Rs 2.5 per litre agri cess on petrol and Rs 4 a litre on diesel. But this was offset by an equivalent reduction in excise duty.

As of now, a basic excise duty (BED) of Rs 2.98 per litre is levied on petrol, and another Rs 12 a litre is charged as special additional excise duty (SAED) and Rs 18 as road and infrastructure cess. To accommodate the agri cess, the BED was cut to Rs 1.4 and SAED to Rs 11.

Similarly, on diesel, BED was cut from Rs 4.83 to Rs 1.8 a litre and SAED to Rs 8 from Rs 9 per litre.

The government had last year hiked excise duty by Rs 13 and Rs 16 per litre to mop up benefits arising from falling international oil prices. It hasn't cut the duty now that oil prices have risen, resulting in fuel prices climbing to record highs.

Petrol comes for Rs 86.30 per litre in Delhi and diesel for Rs 76.48.

In her Budget speech in the Lok Sabha, Sitharaman spoke of monetising operating public infrastructure assets for new infrastructure construction. "A 'National Monetization Pipeline' of potential brownfield infrastructure assets will be launched."

Full coverage of Union Budget 2021 on DH

Infrastructure assets that will be rolled out under this programme will include "oil and gas pipelines of GAIL, IOC and HPCL," she said.

The Finance Minister said the government had kept fuel supplies running across the country without interruption during the Covid-19 lockdown period.

Now, the Ujjwala Scheme under which 8 crore poor households were provided free cooking gas connection will be extended to cover 1 crore more beneficiaries.

Also, 100 more districts will be added in the next 3 years to the City Gas Distribution network.

"A gas pipeline project will be taken up in Union Territory of Jammu & Kashmir," she said adding an independent Gas Transport System Operator will be set up for facilitation and coordination of booking of common carrier capacity in all-natural gas pipelines on a non-discriminatory open access basis.

Commenting on the budget proposals, Deepak Mahurkar, Partner and Leader Oil & Gas, PwC India, said: "The transparent, independent and digital Transport Service Operator will unlock pipeline capacity for the shippers."

Also, the future energy carrier Hydrogen gets the Energy Mission to deal with planning green generation and transportation, he said.

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Prashant Vasisht, Vice President and Co-Head, Corporate Ratings, ICRA said the move towards a gas-based economy is clear in the budget with city gas distribution planned to be rolled out in 100 additional districts and independent gas pipeline operator to be set up for non-discriminatory pipeline access.

"Besides, monetisation of several large oil and gas assets including pipelines through InvITs would open other avenues of funding for the sector," he said adding the reduction in customs duty on naphtha to 2.5 per cent would reduce the realisations of refineries and impact their gross refining margins (GRMs) marginally.

Oil subsidy provided for FY22 and FY21 is fairly adequate, which is positive for the PSU OMCs, he added.