New Delhi: Oil minister Dharmendra Pradhan said on Thursday that the Centre is concerned about the pinch to consumers due to high petrol and diesel prices but a balance has to be struck between their interest and fiscal needs.
However, the minister remained non-committal on the government slashing excise duty to soften the blow of rising international oil prices on the general public.
Petrol price is currently hovering around 55-month high of Rs 74.63 a litre and diesel to a new high of Rs 65.93.
"We are concerned about pinch... We are concerned about the price rise," he said.
Mr Pradhan said the states should cut sales tax or VAT on petrol and diesel to ease the burden.
Asked if his ministry has sought a reduction in excise duty, he said working "piecemeal" will not help. "Let’s see things more holistically. We have to manage the fiscal balance and at the same time, we have to also protect consumer interest," he said adding the government is collectively addressing the issue. Oil prices is "under our close watch," he said.
There has been a demand to cut excise duty on petrol and diesel so that consumers get some relief from high petrol and diesel prices.
Earlier this week finance ministry officials had said that it is not in favour of cutting excise duty on fuel as it will hit the fiscal deficit target.
The central government levies Rs 19.48 a litre of excise duty on petrol and Rs 15.33 per litre on diesel. State sales tax or VAT vary from state to state. In Delhi, VAT on petrol is Rs 15.84 and Rs 9.68 a litre on diesel.
Crude oil prices shot up 24 per cent in the first three months of 2018, and touched a 40-month high in April, owing to continuous decline in global inventories driven by production cuts by Opec and geopolitical tensions.
World Bank in a report this week said that oil prices are forecast to average $65 a barrel over 2018, up from an average of $53 a barrel in 2017, on strong demand from consumers and restraint by oil producers. Prices for energy commodities —which include oil, natural gas, and coal — are forecast to jump 20 percent in 2018, it said.
"Oil prices have more than doubled since bottoming in early 2016, as the large overhang of inventories has been reduced significantly." said John Baffes, senior economist and lead author of the World Bank Commodity Markets Outlook.
"Strong oil demand and greater compliance by the Opec and non-opec producers with their agreed output pledges helped tip the market into deficit."