In a major relief for consumers, the government on Thursday reduced excise duty on petrol and diesel by Rs 1.50 per litre and said the oil marketing companies (OMC) will absorb the impact to the tune of Re 1 per litre. AAP government in New Delhi is also unlikely to cut the fuel prices.
Additionally, the union minister was generous enough to urge the state governments to follow the Center's footsteps and cut down the rates of petrol and diesel.
After the minister's announcement, Jharkhand, Gujarat, Chhattisgarh and Maharashtra too announced a reduction in fuel prices.
Maharashtra's Chief Minister Devendra Fadnavis has just announced an additional relief of Rs 2.5/litre resulting in a total Rs 5/litre drop in petrol prices.
"The government's aim is to give relief to the consumer by increasing their purchasing power without impacting the fiscal deficit", he said.
With assembly elections due later this year in Madhya Pradesh, Rajasthan and Chhattisgarh, where the BJP has high stakes, the decision came a day after the Union Cabinet chose to hike minimum support price for Rabi crops.
"The government's capacity to provide relief is only when domestic factors are strong", he said.
In India, nearly half of the price of retail fuel is due to taxes. This will reduce the overall price by about Rs 5.
From April 1 to October 1 this year, the difference in the petroleum products' cost and freight (C&F) price for refineries and the price at which they were sold to dealers had already narrowed from Rs 4 to Rs 2 a litre for petrol and from Rs 4 to Rs 3 a litre for diesel. In.
Jaitley said the move followed Brent crude oil touching four-year high of Dollars 86 a barrel Wednesday and interest rates in U.S. reaching seven-year high. Soon, several other NDA-ruled states - Chhatisgarh, Tripura, Jharkhand, Madhya Pradesh, Uttar Pradesh, Haryana, Assam, Uttarakhand, Goa, Himachal Pradesh and Arunachal Pradesh - followed suit. Prices have seen a similar hike in other cities as well.
The Minister also maintained that Thursday's decision does not represent a re-regulation of fuel prices.
India's government has introduced a fuel relief as prices at the pump rise inexorably, following soaring worldwide benchmarks, Indian media report, citing the official statement by Finance Minister Arun Jaitley. Yesterday, media reported that the Modi government had allowed local companies affected by the rise in oil prices to borrow internationally up to US$10 billion.
Meanwhile, reports are coming in that Delhi, led by AAP will not cut Value-Added Tax on petrol and diesel.
However the opposition-ruled states refused to toe the Centre's line.
Karnataka chief minister HD Kumaraswamy said he would not reduce taxes on fuel.
"The Centre had hiked excise duty by ₹10 and reduced it by only ₹2.50".
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