States likely to receive bounty from government on oil products

Indian states are likely to receive Rs 24,000 crore bounty or more from the government in form of the excise duty on oil products current year, which is set to jump by around Rs 60,000 crore. Under the 14th Finance Commission, the government has to give 42 percent of the incremental excise mop-up on oil products to states from 2015 to 2020 fiscals.

Excise collections on oil products may expand by incremental Rs 55,000-60,000 crore in the current fiscal year and 42 per cent of these incremental collections would devolve to the states. Excise on oil products has been the biggest contributor to this form of tax kitty of the Centre, as it has been increasing the excise duty on oil products since mid 2014 after the crash in crude prices, While it contributed as much as 63 per cent of the total excise mop-up in the last fiscal year, up from 46 per cent in the previous fiscal year, it is going to jump by around Rs 60,000 crore this year to Rs 1,78,600 crore.

The contribution of oil products to the overall excise duty levied by the Centre has increased significantly from 46 per cent in 2013-14 to around 63 per cent in 2015-16, following a high growth rate of excise on fuels in the recent years. While the Centre mopped up Rs 79,400 crore from oil products in the FY 2014-15, 23 per cent of it or Rs 17,900 crore were devolved to the states in that year.