Oil above $70 to force cut in auto fuel taxes

The Centre may no longer be able to postpone a cut in auto fuel taxes with the Brent crude surging more than 2% on Monday to approach $71/barrel, following a missile attack on Saudi Aramco’s facilities and improved outlook on the recovery of the global economy. Given its acute fiscal constraints, it has so far been resisting a crescendo of demands for tax relief from consumers and the Opposition parties, and stressing the need for coordinated action with state governments to cushion the impact of tax cuts on its own finances.

Bank of America (BofA) had earlier estimated that a Rs 5/litre cut in taxes on petrol and diesel to ease pressure on consumers could widen the Centre’s FY22 fiscal deficit by 30 basis points from the estimated level to 7.5% of GDP.