Govt task force to find ways to soften crude oil blow | Mint

Govt task force to find ways to soften crude oil blow

In the national capital, the retail price of petrol on Tuesday was  ₹95.41 a litre, while diesel was selling at  ₹86.67 per litre. mint
In the national capital, the retail price of petrol on Tuesday was 95.41 a litre, while diesel was selling at 86.67 per litre. mint

Summary

  • The team has been told to find a solution for payment channels hit by sanctions on Russia

A task-force of senior government officials is in the process of finalizing recommendations on how to check the steady rise in retail prices of petroleum products in India against the twin backdrop of the Ukraine crisis and escalating crude prices.

The high-level task-force has also been told to find a solution for payment channels hit by Western sanctions on Russia, according to two government officials aware of the development.

The final recommendations of measures will be submitted to the respective regulators and ministries before they are notified by the finance ministry.

The task-force was constituted last month to look at the potential fallout from the Russia-Ukraine conflict and Western sanctions, and put in place a strategy to deal with it. Officials said the task-force is meeting regularly to assess the developing situation. With global crude oil prices on the boil, its immediate aim is to finalize a strategy to insulate domestic consumers from a spike in petrol and diesel prices.

At the time of writing the story, Brent crude stood at $132.35 per barrel after touching $139.13, the highest the level since 2008. In the national capital, the retail price of petrol on Tuesday was 95.41 a litre, while diesel was selling at 86.67 per litre.

The officials cited above said the petroleum and natural gas ministry is of the view that a mix of excise and VAT duty cut, minimal retail price increases and oil companies bearing a portion of the under-recoveries should be looked as an immediate measure to deal with the situation.

The finance ministry will have to take a call on the quantum of excise duty cuts, while states would be asked to look at reducing VAT as a temporary measure.

The task force comprises of secretaries and other senior officials from across ministries of External Affairs, Defence, Finance, Home, Commerce and Industry and Petroleum and Natural Gas; with the finance ministry being the nodal ministry for the same.

The task force is also looking at measures to deal with the payment pressure being faced by exporters and importers in the wake of western sanctions cutting off some Russian banks from the SWIFT payment system. It favours payments through Russian banks that are still part of the SWIFT system, and those with which European countries are still dealing for making payments for crude oil purchases. In such a situation, transactions could be routed using the Euro as the currency.

The officials said that the task force would give its inputs on sanctions to the Reserve Bank of India as well.

“So far, SWIFT has been excluded only for large banks; so the idea on the table is if we could look routing payments through other banks," said one of the officials cited above requesting anonymity.

“The situation is still fluid as the exact nature of sanctions on Russia is still to be clear. But preparations are required to deal with any eventuality and the task force is working exactly towards that. There are sectors such as oil, defence, energy, fertilisers, trade in goods with which India is closely linked to Russia. So, developments need to be watched closely and necessary strategy put in place," the official added.

Queries emailed to the spokespersons of the ministries of finance, commerce and industry, petroleum and natural gas, external affairs, and defence remained unanswered till press time. A home ministry spokesperson said there was no comments to offer on the emailed queries on the task force.

subhash.narayan@livemint.com

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