The oil sector has been a double blessing for the economy and the government. The prolonged run of subdued international crude prices has not only saved the Centre precious foreign exchange but also solved the issues of under-recoveries and subsidies that have haunted previous governments.
Now, the oil sector is proving a revenue gusher, too, with petroleum products accounting for two of every three rupees collected as excise.
Of the net central excise collection of ₹91,491 crore during April-June of the current fiscal, as much as ₹60,796.25 crore came from petroleum products, with the remaining ₹30,695 crore coming from other products.
And if this trend continues, the overall excise collection for the full fiscal could exceed the 2015-16 figure of ₹2,86,382 crore. For 2016-17, the Budget has targeted central excise duty (exclusive of cess administered by other departments) mop-up of ₹3,17,000 crore.
“The contribution of petroleum products to excise duty collections has always been significant,” said an official, noting that excise duty receipts in the past 30 months have risen in part due to the additional levies.
In fact, aided by the higher receipts from petroleum, oil and lubricants, central excise duty collections registered the sharpest rise under the indirect taxes head in July.
Apart from a basic excise duty on most petroleum products, the Centre also levies a special additional excise duty ₹6 per litre on petrol and diesel. It also hiked the additional excise duty to ₹6 per litre on both fuels.
A part of the duty hikes, done in several phases, was on the back of the lower global crude oil prices.
This helped the government meet its commitment to boost public spending as also make payments of arrears and revised salaries while trying to meet the fiscal deficit target of 3.5 per cent in 2016-17.
“The additional excise duty on petrol and diesel is a road cess and it is used for the clearly specified purpose of highway and rural road construction,” said another Finance Ministry official.
The government has collected ₹17,692 crore in the first quarter of the fiscal from the road cess.
On August 16, the Indian crude basket was $46.51.
The government has indicated that it will not roll back the levies unless oil prices increase dramatically.