Fuel prices may be cut; crude may attract import duty

Fuel prices may be cut; crude may attract import duty

New Delhi: The government may cut retail fuel prices on 6 December, a move that would help rein in inflation and allow Reserve Bank of India (RBI) to go for deeper policy rate cuts to push economic growth.

Official sources said that besides the announcing the cut in petrol, diesel and LPG, a stimulus package to be announced by the government tomorrow may include re-imposition of customs duty on crude oil.

The government had abolished the 5% customs duty on crude, when its price touched a record $147 a barrel in July this year. With crude falling below $50 a barrel now, the Finance Ministry is looking at reimposing the levy.

International crude prices are ruling at four-year lows of near $45 a barrel. High crude prices earlier this year had prompted the government to increase petrol and diesel prices by Rs5 and Rs3 per litre respectively and that of LPG by Rs50 a cylinder.

This had in turn fuelled inflation to double digits. Inflation has since cooled to 8.4% for the week ended 22 November. A cut in fuel prices may bring it down to a tolerable level and give room to RBI to increase money supply to keep the economy ticking despite the global slowdown.

“The Petroleum Ministry has prepared a note for consideration of the Cabinet Committee on Economic Affairs and is pressing for an early meeting," sources said.