Representational file image.
| Photo Credit: Reuters

The government on Tuesday (September 17, 2024) slashed windfall tax on domestically produced crude oil to ‘nil’ per tonne with effect from September 18.

The tax is levied in the form of special additional excise duty (SAED) and is notified fortnightly based on average oil prices in two weeks.

The last such revision took place effective August 31 when the windfall tax on crude petroleum was set at ₹1,850 per tonne.

The SAED on the export of diesel, petrol and jet fuel or ATF, has been retained at ‘nil’. The new rates are effective from September 18, an official notification said.

India first imposed windfall profit taxes on July 1, 2022, joining a host of nations that tax supernormal profits of energy companies.

Image used for representational purpose only.
| Photo Credit: Reuters

The wholesale price based inflation remained in the negative territory for the fourth straight month in July at (-)1.36% on easing prices of fuel, even though food articles turned costlier.

The wholesale price index (WPI) based inflation rate has been in the negative since April and was (-)4.12% in June. In July last year it was 14.07%.

Inflation in food articles skyrocketed 14.2% in July against 1.32% in June.

“Decline in the rate of inflation in July, 2023 is primarily contributed by fall in prices of mineral oils, basic metals, chemical & chemical products, textiles and food products,” the commerce and industry ministry said on August 14.

Fuel and power basket inflation eased to (-)12.79% in July from (-)12.63% in June.

In manufactured products, the inflation rate was (-)2.51% as against (-)2.71% in June.

The RBI last week kept interest rates unchanged at 6.5% for the third straight meeting but signalled tighter policy if food prices drive inflation higher.

“The job on inflation is still not done,” RBI Governor Shaktikanta Das had said.

“Inflationary risks persist amidst volatile international food and energy prices, lingering geopolitical tensions and weather-related uncertainties.”

The RBI raised its inflation forecast for the current financial year ending March 2024 to 5.4% from 5.1% earlier, citing pressures from food prices.

The Central bank takes into account retail or consumer price index based inflation for formulating monetary policy. Retail inflation data for July is scheduled to be released later in the day.

The decline in the inflation rate in June is primarily due to a fall in prices of mineral oils, food products
| Photo Credit: Reuters

India’s wholesale prices remained in deflationary territory for the third successive month in June, with the pace of price contraction from a year ago quickening to -4.12% from -3.48% in May.

This is the sharpest contraction in wholesale prices in about eight years, and was largely aided by the base effects from last June when wholesale price inflation was 16.2%, and some deceleration in commodity prices.

Some food items such as milk, cereals, pulses and wheat, reported high inflation rates in the range of 8%-9%. Vegetables reported 22% deflation year-on-year, but prices were up 13.2% in June, when compared to May.

While fuel and power inflation rate skidded to -12.6% in June from -9.2% in May, the dip in prices in other categories was milder, with the Food Index down just 1.2% compared to -1.6% in May. Sequentially, however, wholesale food prices were up 1.4% from May.

Deflation in primary articles’ prices moved to -2.9% from -1.8% in May, but their prices inched up 0.6% from May. Manufactured products’ prices fell 2.7% from last June and 0.5% from May 2023 levels.

The Commerce and Industry Ministry said the decline in the inflation rate in June is primarily due to a fall in prices of mineral oils, food products, basic metals, crude petroleum & natural gas and textiles. The ministry also revised upward the inflation rate for April 2023 to -0.79% from -0.90% estimated earlier.

Rating firm ICRA reckoned that the deflation in the WPI will ease to 2%-2.5% in July with global commodity prices seeing a sequential rise of 1.2% so far this month. The surge in prices of vegetables, with a “moderate hardening in cereals and pulses” due to supply disruptions amid excess rainfall, along with the lag in sowing of major crops and the onset of El Nino conditions impart uncertainty to the food inflation outlook, it noted.

“The moderation in food inflation in year-on-year terms masks the sequential price rise: The month-on-month increase in food prices was similar to that seen in retail inflation data for June,” said a research note by Barclays’ analysts, which said food prices surged across the board in June, except in the case of fruits and oilseeds.

The gap between retail inflation, which hit a three-month high of 4.8% in June, and wholesale inflation has now widened to 893 basis points, the highest since June 2022, and economists expect the deflation in wholesale prices to help moderate retail prices with a lag.

One basis point equals 0.01%.