Indian government trims tax on fuel to fight rising inflation

India’s Finance Minister Nirmala Sitharaman on Saturday announced a reduction of taxes on petrol and diesel to fight inflation and keep prices of essential items in check.

The excise duty on petrol was reduced by 8 rupees ($0.1028) per litre, and for diesel by 6 rupees per litre, she said in a series of tweets.

The government is expected to take a hit of about 1 trillion Indian rupees on its annual revenue due to the move, she said, urging the state governments to follow suit with similar reductions keeping in line with the federal government’s plan.

Currently, a litre of petrol costs 105.41 rupees, while diesel is at 96.67 rupees in New Delhi. “Prime Minister Narendra Modi has specifically asked all arms of the government to work with sensitivity and give relief to the common man,” Sitharaman said.

The government will also give a subsidy of 200 rupees per gas cylinder to over 90 million beneficiaries under a welfare scheme introduced for women below the poverty line.

The subsidy will have an annual revenue implication of nearly 61 billion Indian rupees, she said.

The latest move is likely to increase fiscal concerns and raise doubts about government meeting its deficit target of 6.4% of GDP for 2022-23.

India, Russia talks: India is in talks with Russia over a deal to buy oil at discounted rates, the chairman of India’s state-run Hindustan Petroleum Corp. said on Thursday, at a time when much of the West is shunning Russian crude over the conflict in Ukraine.

India, the world’s third biggest oil importer and consumer, is struggling like much of the rest of the world with inflation at multi-year highs, and is keen to cut its import bill and protect consumers from soaring fuel prices.

The country has already bought more than twice as much crude from Russia since Moscow’s invasion of Ukraine on Feb. 24 as it did in the whole of 2021, according to Reuters calculations, with sources saying Indian buyers were getting discounted prices.

But the comments from HPCL Chairman Pushp Kumar Joshi signal New Delhi is directly involved, at a time when many Western countries have hit Russia with unprecedented sanctions in an attempt limit its funds for waging war.

While New Delhi has called for an immediate ceasefire in Ukraine, it has not explicitly condemned Moscow’s actions.

“There are discussions (happening) on a G to G (government to government) level. We are open to any kind of opportunity and if something is done on G to G level we would obviously be a part of that,” Joshi said at HPCL’s quarterly earnings news conference.

Group of Seven (G7) nations have said they are committed to ban or phase out imports of Russian oil to isolate Moscow for its war against Ukraine.

Joshi declined to comment on the quantity and discounts under negotiation, citing “commercial interest of both the parties”.

“Any opportunity coming in future of utilising Russian crude, definitely we will be utilising that depending on technical and economical requirement. It should make sense (in terms of) freight, insurance, (and) various factors,” he said.

Indian refiners are negotiating a six-month oil deal with Russia to import millions of barrels per month, sources told Reuters last month.

Separately on Thursday, India has asked  its federal power regulator to allow power generators to import up to 30% of the country’s coal requirement until March next year, according to a power ministry letter seen by Reuters.

India had asked utilities to import 10% of its total requirement, or about 38 million tonnes, to blend with local coal as demand was outstripping supply, adding that delivery of 19 million tonnes had to be ensured by end-June.

However, in a May 18 letter to the secretary of the Central Electricity Regulatory Commission (CERC), a federal power ministry official citing a “public interest” provision in india’s electricity law said it was “imperative” power generators be allowed to use more imported coal.

The demand to allow more imported coal reflects the severity of the domestic shortage, which has caused the country’s worst power cuts in more than six years as a heatwave bakes vast swathes of South Asia.

“In the public interest, CERC is hereby directed to immediately allow the higher amount of blending of up to 30% with imported coal in compliance with the decision of the Ministry of Power, without beneficiaries’ consultation up to 31st March,” the letter read.

It was not immediately clear if beneficiaries meant power distribution companies or end-consumers. The power ministry did not immediately respond to a request seeking comment.

The power ministry official said CERC had denied permission to some state government-run utilities to import, as the quantity could potentially violate rules which restrict generators from blending imported coal beyond a certain extent without the consent of beneficiaries.

“There is an urgent need to save domestic coal to build reasonable coal stocks at power plants before the monsoon,” the official said in the letter, adding that power plant inventories were depleting at a “worrisome” rate.