Sasmit Patra Warns of Economic Fallout from Fuel Duty Cuts Amid West Asia Tensions

Concerns Over Revenue Loss and Economic Impact

New Delhi: On Saturday, BJD MP Sasmit Patra expressed concerns that the recent excise duty reductions on petrol and diesel could lead to a significant revenue shortfall for the Indian government, estimating losses between Rs 3 to 4 lakh crore. He also highlighted the potential economic repercussions linked to the ongoing conflict in West Asia.

Patra remarked, “The situation in West Asia has a global ripple effect, impacting India as well. The excise duty reduction will result in a revenue loss of approximately Rs 3–4 lakh crore.”

He pointed out that escalating oil prices and supply chain disruptions could hinder economic growth.

“The rise in oil prices may slow down economic progress. Supply chain delays could negatively impact industrial output. Many industrial processes rely on fuels like propane, PNG, and LPG. This scenario could weaken our overall economic stability,” he stated.

While expressing cautious optimism regarding diplomatic efforts, Patra noted the ongoing negotiations between Iran and the United States.

“Negotiations have commenced between Iran and the United States, with both parties presenting their demands. We are moving towards mediation, and a swift resolution would be ideal,” he added.

He also mentioned recent maritime developments in the Strait of Hormuz.

“Iran has permitted certain vessels, including those from India, to navigate through the Strait of Hormuz. Some Indian ships have already passed, with more anticipated. However, if the West Asia crisis remains unresolved, the situation will worsen,” he cautioned, advocating for a prompt resolution to the conflict.

On Friday, the government announced a reduction in excise duties on petrol and diesel by Rs 10 per litre, lowering petrol to Rs 3 per litre and diesel to zero, in an effort to mitigate the effects of rising global oil prices.

Additionally, the government has provided duty exemptions for fuel exports and supplies to international aircraft.

Separately, the Centre has revoked a previous 2022 notification, offering customs duty relief on imported aviation turbine fuel (ATF).

This reduction comes amid concerns of potential price increases due to the global energy crisis, exacerbated by the US-Israel conflict with Iran and the blockade of the Strait of Hormuz.

Oil marketing companies (OMCs) are expected to absorb the duty cuts to counterbalance their increasing losses, which are currently estimated at around Rs 48.8 per litre on fuel sales, primarily due to high global crude prices.

In the meantime, global oil prices have seen a decline, with Brent crude futures dropping by 2.29 percent to $105.53 per barrel, while US WTI futures fell by 2.54 percent to $92.08 as of 8:50 am.