Petrol, diesel prices cut by Rs 2.50 after excise reduction

Devin Lawrence
October 4, 2018

Finance Minister Arun Jaitley on Thursday cut petrol and diesel prices by Rs 2.50 per litre with immediate effect, providing some relief from rising fuel prices. He added that there would be tax cuts in Kerala, only if fuel prices are brought down to the level when the Narendra Modi government assumed office in May 2014.

The minister recalled that the central government had reduced taxes on fuel last October by Rs 2 and only states ruled by the BJP-led NDA coalition had announced matching cut in state taxes.

Price cut in states like Gujarat and Maharashtra would be Rs 5 after they matched the announcement with a similar reduction in local sales tax or VAT rates. While Jharkhand has cut diesel prices by Rs 2.50, but there has been no announcement of petrol yet. Notably, central and state taxes and levies amount to more than the cost it takes to manufacture motor fuel. "So, a total of Rs 2.50 will be reduced on both diesel and petrol", said Jaitely.

"Jharkhand Government has chose to give an additional relief of Rs 2.5/litre on diesel in the state", ANI quoted Raghubar Das as saying. PM Modi consulted Union Finance Minister Arun Jaitley and Oil Minister Dharmendra Pradhan.

He said the reduction in fuel price wasn't bad economics.

"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. Rajasthan, Andhra Pradesh and Karnataka are among the handful of states which have reduced Value-Added Tax.

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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.

In Mumbai, petrol is being retailed at Rs 91.32 a litre and diesel at Rs 80.10 per litre after being hiked by 14 paise and 21 paise, respectively.

The Minister expressed confidence about meeting the fiscal deficit target despite the excise duty cut, saying increased revenue collections would absorb the impact of the cuts.

Nearly half of the fuel price is made up of taxes.

"I am confident we'll be able to maintain the fiscal deficit even after absorbing this", the minister said.

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