Higher petrol, diesel consumption can help govt cut fuel cess without impacting revenues: ICRA

A rise in petrol and diesel consumption can help the government cut cesses on the fuels by Rs 4.5 a litre without impacting revenue collections of FY21, and help cool off the pressure on inflation, domestic rating agency ICRA said on Friday. Petrol consumption is estimated to increase 14 per cent in 2021-22 and diesel by 10 per cent on the lower base, rise in mobility and economic recovery, ICRA said. The rating agency added that it will result in an additional Rs 40,000 crore in revenue for the government through higher collections of the cess.

If the government chooses to forego this additional cess collection of Rs 40,000 crore, it can reduce the cesses by Rs 4.5 per litre, and help contain the inflation situation which has breached the Reserve Bank of India’s (RBI) target band in May, ICRA said.