New Delhi, June 25 (TIWN) Rise in the consumption of petrol and diesel in FY22 can absorb the cuts in cesses by Rs 4.5 per litre, without revenue loss to the Centre relative to FY2021, said ratings agency ICRA.

"Benefitting from the revival in consumption of fuels, the aggregate revenue generated from the cesses imposed by the Government of India on MS and HSD is estimated by ICRA to expand by 13 per cent or Rs 0.4 trillion to Rs 3.6 trillion in FY2022," it added.  If this additional revenue of Rs 0.4 trillion is foregone, the report said, it can support a reduction in cesses by Rs 4.5 per litre each on MS and HSD.  "Such a revenue neutral cut in cesses on fuels would shave off a modest 10 bps from ICRA's forecast of 5.25 per cent for CPI inflation for July 2021, in terms of the first-round impact, with a similar second round impact likely with a moderate lag," ICRA said.  According to Aditi Nayar, Chief Economist, ICRA, the forecasts suggest that consumption in FY2022, relative to the pre-Covid level of FY2020, will be 6.7 per cent higher for MS, and 3.3 per cent lower for HSD.