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SBI economic body suggests measures to reduce fuel prices

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New Delhi [India] | May 28, 2018 7:41:28 PM IST
As the rising fuel price has become a matter of concern for the general public, the Economic Research Department of State Bank of India (SBI) on Monday suggested some measures to reduce the prices of petrol and diesel.

The report, authored by Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, suggested following measures:

We believe finding a lasting solution to current increase in oil prices is a delicate balancing act. Our analysis shows that at the current crude prices, and extending our analysis to 19 states (overall consumption share is 93 percent both in petrol and diesel), the states could have gained at least an additional Rs 18,728 crores of revenue / Rs 2675 crore additional revenue over and above the budget estimates of states revenue for every $1/barrel increase in oil prices.

Given that these revenue, if foregone will not impact states fiscal position, we estimate that on an average, states can cut petrol prices by Rs 2.65 /litre and diesel by Rs 2/ litre, if the entire revenue gain was to be neutralised. This is the most plausible scenario under the current circumstances.

Additionally, one suggestion to further rationalise the petrol and diesel prices is to consider a pricing mechanism where VAT is imposed on base price only by states and not on prices inclusive of Centre's tax. If this was the case, diesel prices could further reduce by Rs 3.75 /litre and petrol prices by Rs 5.75/ litre. However, if this was to happen, the state will have to forego Rs 34,627 crores of tax revenue / 0.2 percent of consolidated fiscal deficit of states.

Petrol and diesel prices continue to touch another peak for the 15th consecutive day, with the key transportation fuel being sold at Rs 78. 27 per litre in Delhi.

The revised petrol prices in metropolitan cities are- Delhi: Rs 78.27 per litre; Mumbai: 86.08; Kolkata: 80.76 and Chennai: 81.11.

Meanwhile, the cost of diesel per liter has also been increased and the revised prices in Delhi are - Rs 69.17 and Mumbai Rs 73.64 per litre. (ANI)

 
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