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Petro products may bear the brunt
By Our Special Correspondent
NEW DELHI, JAN. 9. With the Government's move to arm itself with additional powers to increase excise duty attracting political criticism, there is some reconsideration in the Finance Ministry about the items where the higher duty could be imposed.
It now seems that while some items of consumption are under consideration for the additional impost, the bulk of the additional revenue could be garnered from petroleum products. There are two advantages of doing this.
First, petroleum products are one segment which could provide the Government with immediate financial gains since its consumption pattern is fairly inelastic. In other words, a higher price in the case of petroleum products need not necessarily lead to a major slump in demand. Whereas in the case of other items, the demand may fall once the prices go up. Also, petroleum products account for the bulk of the total excise collections, more than 50 per cent according to some estimates.
Secondly, to ward off public criticism, there is a possibility that the Government may ask the oil companies to absorb the duty high and not pass it on the consumers. Though this will increase the deficit of the oil companies, the unofficial explanation is that the oil pool account is already in a deficit of over Rs. 8,000 crores which the Government will compensate through bonds in the post-April period when the administered price mechanism will be dismantled. Hence, if there is a further increase in the deficit, the amount of the bonds could be proportionately raised.
Sources in the Government indicated that the additional excise collections from petroleum products could fetch about Rs 1,500 crores to Rs. 2,000 crores in the remaining part of the current fiscal. Experts, however, point out that in case the Government resorts to this sort of ``financial engineering,'' it will only be postponing its deficit in order to show a better fiscal picture this year.
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