Fuel price cut by Rs 5 in some BJP-ruled states after Centre reduces excise duty

On the bullish stock markets and weakening of Rupee, Arun Jaitley blamed it on Brent crude touching a four-year high of $86 a barrel and interest rates in US reaching high level in seven years.

FM Arun Jaitley addressing a press conference at North Block in New Delhi. (Source: Express Photo By Amit Mehra)

In a huge relief to consumers from rising fuel rises, the Government cut excise duty on petrol and diesel by Rs 2.50, Union Finance Arun Jaitley announced on Thursday.

Briefing the press after attending an inter-ministerial meeting chaired by Prime Minister Narendra Modi in New Delhi, Jaitley said the government and oil companies will absorb the price cut by Rs 1.50 and Rs 1 respectively. Jaitley urged state governments to also reduce Value Added Tax (VAT) on fuel by another Rs 2.50.

The relief to consumers will be in three parts — centre will cut excise duty by Rs 1.5, and oil marketing companies (OMCs) will factor in Re 1 in their pricing, and states have been asked to cut VAT as they have raked in windfall gains due to ad valorem nature of the levy that results in higher realisation whenever rates move up, he said.

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“The states’ revenue increases because of increased crude oil prices and hence it is easier for the states to absorb Rs 2.50,” he said.

Jaitley said it will be a test for those states whose leaders were only tweeting and indulging in lip sympathy. “What will they do now and last time also only BJP and NDA-led state governments reduced VAT. This time if other state governments do not do it then people will ask them,” he said.

READ | Why the government delayed the fuel price cut and what may have forced its hand

Immediately following Jaitley’s announcement, several BJP-ruled states including Maharashtra, Gujarat, Madhya Pradesh, Uttar Pradesh and Chhattisgarh have announced an additional relief of Rs 2.5/litre on petrol and diesel. “Thank you Hon PM @narendramodi ji and Union Minister @arunjaitley ji for reducing ₹2.50/litre on both Diesel and Petrol. This will give huge relief to common citizens,” Maharashtra Chief Minister Devendra Fadnavis tweeted.

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In Delhi, where the fuel prices are the lowest among all metros and most state capital, petrol is sold at Rs 84 per litre and diesel at Rs 75.45.

On the bullish stock markets and weakening of Rupee, Jaitley blamed it on Brent crude prices touching a four-year high of $86 a barrel and interest rates in the US reaching their highest level in seven years.

“A large number of international factors, as I have repeatedly said, primarily the rising prices of Brent crude and also the domestic measures taken in the US in terms of policy and raising of interest rates, has a significant impact across the world,” Jaitley said.

The impact was felt both in stock and currency markets, he said.

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Inflation in India, however, is still moderate at less than 4 per cent and higher direct tax collections give comfort with regard to fiscal deficit, he said adding domestic macroeconomic indicators are strong and stable, except for current account deficit.