The indirect tax revenue collection of the government this fiscal has been tepid and the fiscal deficit during the first six months of FY15 has already reached 83%. The government had budgeted 20% growth in indirect tax collection in FY15. The government, amid stressed finances with the price of Indian crude basket falling to USD78.92 per barrel on 12 November 2014 from USD84.77 per barrel on 30 October 2014, decided to shore up its revenue instead of passing the benefit to consumers.
The sharp fall in the global crude prices has resulted in the public sector oil marketing companies making over-recovery on the sale of petrol and diesel lately. This prompted the government to not only deregulate the diesel prices but also pass on the benefit to consumers. Over the past two months, petrol prices for consumers have fallen up to INR11.0 per litre and diesel prices up to INR5.6 per litre, depending on the city/state across the country. We expect the diesel deregulation to bring the oil subsidy down by INR150bn.
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