The government’s increase in petrol and diesel taxes by $21 a barrel and $27 a barrel will result in tax collection increasing by about $21 billion if the tax hike is maintained for a full year, Moody’s Investors Service said on Wednesday.
“This reinforces the importance of oil marketing companies to the government and validates the support incorporated in our credit assessment of these companies,” said Vikas Halan, Senior Vice President for Corporate Finance at Moody’s. “The tax hike could result in higher working capital outflow for the oil marketing companies, which will partly offset the working capital savings from lower inventory costs,” he said in a statement.
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A day earlier, the Centre announced an increase in excise duties by Rs 10 per litre on petrol and Rs 13 per litre on diesel. However, retail sale prices will not change and the impact will be borne by oil marketing companies.
The revenue generated from these duties will be used for infrastructure and other developmental items of expenditure.