Fuel prices continued to be on the rise, with the price of petrol touching Rs 81 in New Delhi. Diesel prices touched Rs 73.08 per litre in the national capital.
Fuel prices also continued to rise in Mumbai with petrol touching Rs 88.39 and diesel slowly clawing to the Rs 90 mark, being priced at Rs 77.58 per litre.
Earlier, even as petrol and diesel prices continue to soar, worries about falling revenues and impact on the country's fiscal deficit, which the government officials say, is holding back the government from cutting taxes on fuel.
"The government will hold the excise duty cut for now. Cutting excise duty at the current level of rupee may lead to twin deficit," a top government official said.
There is already a fear that the fiscal target could be breached this year as GST collections are yet to stabilise over Rs 1 lakh crore a month as against an average collection of Rs 95,000 crore per month in the current fiscal. The government feels that it needs to increase the share of non-oil tax revenues.
The government is not likely to go for an expenditure cut to meet the fiscal deficit target as it is in the last year of its term. "The government will not go for an expenditure cut," the official said.
A call on the price reduction will be taken at the highest political level if the government decides to provide immediate relief to common man at some point of time. The Prime Minister's Office (PMO) is expected to hold meetings starting this weekend to review the economic situation.
The government concedes that it is like a double edged sword. "If fuel prices are not reined in, it has an inflationary impact. But if it is unable to meet the fiscal deficit target which is set at 3.3% of the GDP for 2018-19, investors will lose confidence in the economy and abandon us," said another official.
"Any impact on fiscal deficit will shake the faith that foreign institutional investors (FIIs) and foreign portfolio investors (FPIs) have reposed in our economy," the official added.
A fall in revenue from petrol and diesel will impact the states' finances too. Over 40% of the central excise tax collections from fuel go to states. In absence of that, their capital expenditure and welfare schemes will get impacted, an advisor in the ministry said. However, some of the state governments - Rajasthan, Andhra Pradesh and West Bengal – have already reduced VAT on fuel.
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