The Centre’s flagship programs will also benefit from fee reductions

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NEW DELHI: It’s not just consumers and small businesses that will benefit from Saturday’s duty cuts on fuel, steel and plastics. Even the Centre’s flagship programs – such as the Jal Jeevan mission (the program to provide tap water to every household) – which have been hit due to a sharp rise in prices in recent months, could benefit.
Although the government had been under pressure for more than two months to reduce taxes on fuel and other basic commodities, especially after the war in Ukraine, it did not follow this path, hoping that the situation would improve in the coming weeks. With global prices showing no signs of falling, the Modi administration decided to cut levies as inflation hit its highest level in at least eight years.
“The price of steel and plastic was affecting the Jal Jeevan mission plan as the cost was increasing significantly beyond what we had anticipated,” a senior government official told TOI. The program involves the supply of pipes in large quantities. Along with a reduction in excise duties on petrol and diesel, Finance Minister Nirmala Sitharaman lowered import duties on several inputs and raw materials as well as on fuel used by the steel and plastic.
Rising prices for steel, cement and other metals are also expected to push up the cost of infrastructure projects, a key part of the government’s capital spending strategy to boost public spending and create demand and jobs.
“When prices rise, inflationary pressures need to be tackled and we need to be prepared for them. Rising infrastructure costs are an invisible but predictable problem, which we may need to address in the future,” a senior government official said.
In addition, the Center has faced repeated demands from micro, small and medium-sized enterprises (MSMEs) regarding constantly rising input prices and shrinking margins. In fact, these players had asked to allow imports, especially of steel products, since the domestic industry was not willing to lower prices. Steel companies had an exceptional year, thanks to a massive jump in world prices.
Official sources have also said that they are watching the revenue situation closely as the cut in oil duties will result in a loss of around Rs 1 lakh crore on an annualized basis. In addition, Sitharaman has pledged to more than double the fertilizer subsidy to around Rs 2.2 lakh crore, in addition to an outflow of Rs 80,000 crore due to the extension of the supplementary food grain program for poor.
Currently, the government has strong fiscal buoyancy, due to strong GST and direct tax collections. However, some economists are of the opinion that there could be pressures on the overall budgetary situation in the future.



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