Budget 2018: Not enough fuel to kindle a fire
Thrust towards ensuring electricity access to households under the Saubhagya scheme could provide some boost to energy demand
■ Subsidy provided for kerosene and LPG (liquefied petroleum gas) for fiscal year 2019 is around Rs25,000 crore, which includes Rs3,200 crore towards cooking gas connections for poor households.
■ A Rs2 per litre cut in basic excise duty on petrol and diesel, and a levy of road and infrastructure cess on petrol and diesel.
■ Allocation of Rs16,000 crore under the Saubhagya scheme (Pradhan Mantri Sahaj Bijli Har Ghar Yojana) to provide electricity to all households in the country.
■ The subsidy provided for kerosene and LPG appears rather low when one considers this in the backdrop of rising crude oil prices. The Street expects this variable to be bigger. Higher crude oil prices are expected to result in Rs47,000 crore of under-recoveries in FY19, pointed out Motilal Oswal Securities Ltd in a recent report.
■ The final impact on total excise duty on petrol and diesel remains the same as a result of the changes made in the tax structure. According to Icra Ltd, more taxes are aligned towards road and infrastructure cess and less towards excise duty, so that adequate funds will be available for the road-building programme without impacting consumer prices.
■ Thrust towards ensuring electricity access to households under the Saubhagya scheme could provide some boost to energy demand.
Stocks in focus:
■ Oil and Natural Gas Corp. Ltd shares fell by 4%. One reason for the lack of enthusiasm could be the lower-than-expected subsidy. Further, no announcements were made pertaining to reducing the cess on crude oil.
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