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This article is more than 3 year old.

JP Morgan expects government to cut excise on oil

JP Morgan expects government to cut excise on oil
At a time when crude oil prices witnessing an unprecedented increase, US-based bank JP Morgan said it expects the government to cut excise duty on oil.
"In our view, a short term fix would be excise duty cut of Rs1-2/litre, which provides some breathing space," said Pinakin Parekh of JP Morgan.
The prices of Brent Crude oil had crossed $80 a barrel and is now trading at $79 per barrel.
Petrol price in India on Monday touched a record high of Rs 76.24 per litre (Delhi) and diesel climbed to its highest ever level of Rs 67.57.
Even though, JP Morgan expects a cut, the bank said there is less chance of returning the subsidy regime.
"Overall we see a very low probability of the return of explicit subsidy regime given the associated problems (credit rating, investment outlook across the energy space)," said Parekh.
If the policy makers want to maintain free market pricing, but limit price increases at the retail level, they have to cut excise duties sharply, said Parekh, adding that the duty cut means a large revenue loss to the government.
Parekh suggested that the revenue loss can be offset by tax increases elsewhere. "Capping ONGC’s crude realisation is also a possibility,” he said.
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