With global crude oil prices again trending upwards and trading above $64 per barrel, Petroleum Minister Dharmendra Pradhan on Thursday hinted that it will consider reducing excise duties.

However, the State Bank of India in its report estimates that the impact of a $2 increase in crude prices could have an impact of up to 0.16 per cent of GDP on the country’s current account deficit in the balance of payments, while retail price inflation could rise by about 3 to 5 basis points. If the government decided to cut excise duty in case crude prices rise further, the way it did recently, then there would be revenue loss of Rs 30,000 crore to Rs 35,000 crore.

When crude oil prices rise, the government at times reduces excise duty on auto fuel to soften the impact on motorists, sacrificing some of its revenue. Petrol price in the national capital, which was above Rs 70 per litre, fell sharply after an excise duty cut of Rs 2 per litre in the beginning of October, but is once again inching closer to the mark as global crude hit yet another high of $64.22, highest since July 2015.

With the constant rise in international oil prices, fuel prices are also set to increase. Experts said it will be interesting to see whether the government further reduces excise duty to give relief to the common man ahead of elections.

Crude prices crossed $64 a barrel due to OPEC (Oil Producing and Exporting Countries)-led output cuts. OPEC and some non-OPEC producers including Russia have pledged to curb their production by around 1.8 million barrels per day (bpd) till March 2018 to drain a global supply glut.