Saeima cuts excise duty on diesel for three months

RIGA - The Saeima on Thursday passed in the final reading a law on limiting the increase in fuel prices, which provides for short-term measures aimed at mitigating the impact of the price hikes on the Latvian economy and population.

Lawmakers passed the draft legislation in a fast-track procedure, which triggered an outcry from the opposition. Before the second reading of the bill, the Saeima Budget and Finance (Taxation) Committee was convened to review the submitted proposals.

Opposition MP Ramona Petravica (Latvia First) submitted a proposal to cut the diesel fuel price by approximately EUR 0.16, to EUR 330 per 1,000 liters.

A representative of the Finance Ministry told the Budget and Finance (Taxation) Committee ahead of the second reading that the decision needs to be fiscally neutral and that the proposed small excise duty cannot ensure fiscal neutrality. The committee rejected the opposition lawmaker's proposal. Immediately after the vote, Petravica left the meeting room.

Despite the opposition's criticism, the bill was supported in the second, final reading by all 94 deputies who attended the Saeima meeting.

"This is a balanced decision that helps to reduce the cost pressure on businesses and at the same time strengthens economic stability. At the same time, the overall level of budget revenues is maintained," said Anda Caksa (New Unity), Chair of the Budget and Finance (Taxation) Committee responsible for the draft law.

The law provides for a temporary reduction in the excise duty on diesel fuel - from the current EUR 467 to EUR 396 per 1,000 liters. For marked agricultural diesel, the excise duty rate is set at EUR 21 per 1,000 liters. The reduced rates will be in effect from April 1 to June 30.

The aim of the new regulation is to mitigate the negative impact of rising fuel prices on household spending, business costs and the overall inflation rate. Fuel price increases have a significant impact on the costs of transport, logistics and other sectors, creating a further cost-push effect on the prices of goods and services.

The adoption of the bill is linked to a significant increase in fuel prices on international markets due to geopolitical events and disruptions in oil supply chains. In recent weeks, there has been a sharp increase in the price of oil and diesel, which has a direct impact on the Latvian market, given the high share of imports in the fuel supply.

In view of the evolving situation, the government devised a temporary solution to respond promptly to price fluctuations, at the same time maintaining the balance of the state budget. The reduction in excise duty will partially offset price increases and help stabilize the economic environment.