Rising oil prices may lead to revenue loss of Rs 1 lakh cr for government in FY23: SBI report

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Rising oil prices, which crossed the $100 a barrel mark on Thursday amid the ongoing Russian-Ukrainian conflict, may upend the government’s budget calculations, causing it problems.

According to a report by the Economics arm of the State Bank of India (SBI), soaring crude oil prices may cause the Modi waiver to lose revenue of around Rs 95,000 crore to Rs 1 lakh crore over the course of the year. exercise 23.

Despite rising oil prices, the government has kept gasoline and diesel prices unchanged since November 2021.

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“Based on the existing VAT structure and taking the price of Brent crude from $95/barrel to $110/barrel, diesel and gasoline prices should have been Rs 9-14 higher from right now,” SBI’s ‘Ecowrap’ said.

He further noted that if the government, however, further reduces excise duty on petroleum products by Rs 7 per liter in March after the election and prevents petrol and diesel prices from rising, it will suffer a loss of excise duty of Rs 8,000 crore for one month.

“And if we assume that the reduced excise duties continue into the next fiscal year and that gasoline and diesel consumption increases by about 8-10% in fiscal year 23, the loss of revenue from the government would be around Rs 95,000 crore to Rs 1 lakh crore for FY23,” the report said.

In this context, FY23 budget numbers that are conservatively indexed would act as a clear counter-cyclical buffer for such lost revenue, he added.

Read also : High crude oil prices could lead to demand destruction

The country’s retail price inflation stood at 6.01% in January, a seven-month high, is already close to the RBI’s tolerance band. Additionally, the ongoing conflict between Russia and Ukraine will likely add to the central bank’s woes.

Notwithstanding the trajectory of crude oil prices, the impact on inflation in the Indian context will be closely watched.

“The average Indian basket price of crude oil rose to $84.67/barrel on Jan 22 from $63.4/barrel on April 21, an increase of 33.5%. If the price of crude oil rises averaging $100/barrel from the current average, inflation is expected to rise by 52 to 65 basis points,” the report said.

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