NEW DELHI: The Centre’s move to cut taxes and impose a windfall on diesel and jet fuel will leave it about Rs 1.3 lakh crore poorer if the energy crisis due to conflict in West Asia continues for a full year.Reaching an early solution will relieve pressure on oil prices and thus on the government and oil companies. Ratings agency ICRA said on Thursday that a recently established economic stabilization fund could help offset some of the fiscal impact.For now, it has been able to ensure complete protection for consumers as oil retailers and the government will share the burden of rising crude oil prices. For oil marketing companies, which will have to take a hit during the March quarter, the impact will not be significant if the Indian basket remains around the current level of $112 per barrel.
“With the recent reduction in tariffs and no change in retail gasoline and diesel prices, crude oil companies are expected to break even at a crude oil price of approximately $106 per barrel for refining and retail operations, versus approximately $90 per barrel before the tariff reduction,” CareEdge Ratings said in a note.But for the current financial year, oil companies are fully protected because they were making profits from every liter of petrol they sold until the outbreak of war, just as the Center was reaping revenues, as the gains from lower oil prices were not passed on.For states, revenue from VAT is likely to increase by at least Rs 25,000 crore in FY27, with Karnataka being the biggest gainer, SBI Research said in a report, while suggesting that they should cut the tax in line with the Centre.