Central government cuts fuel prices by Rs 2.50 a litre in India

Jermaine Castillo
October 5, 2018

Addressing a press conference in New Delhi today, Finance Minister Arun Jaitley said the government will write to all states to cut a portion of their tax as well on petrol, diesel.

All the cuts will be effective from midnight, as clarified by Dr. Hasmukh Adhia, finance secretary.

Delhi chief minister Arvind Kejriwal also took to Twitter saying that the Modi government has hiked the excise duty by Rs 10 and slashed prices by just Rs 2.50. "The relief is insignificant and like a needle in haystack", party spokesperson Randeep Surjewala said daring the government to bring fuel prices to 2014 levels.

"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. In Mumbai, petrol rates had breached Rs 90 per litre.

In a tweet, Gujarat Chief Minister Vijay Rupani announced that "the government of Gujarat has chose to cut Rs 2.50 on both petrol and diesel".

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The Centre's decision was announced after high-level consultations involving Prime Minister Narendra Modi, BJP president Amit Shah, Finance Minister Arun Jaitley, Petroleum Minister Dharmendra Pradhan and Railway Minister Piyush Goyal. The centre levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel. This will give huge relief to common citizens.

Taxes on petrol and diesel, which account for more than a third of retail fuel prices, are one of the biggest sources of income for the government, which is seeking to keep the country's budget deficit in check.

States saw their Value-Added Tax revenue from petro goods rise from Rs 1,37,157 crore in 2014-15 to Rs 1,84,091 crore in 2017-18.

Gujarat government also chose to reduce petrol, diesel prices by Rs 2.5 per litre.

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

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Madhya Pradesh also announced a cut of Rs 2.5 per litre in petrol and diesel prices.

► However, Bihar Deputy CM Sushil Modi said that they haven't received any letter from Jaitley ji. "First we will see the order, then make a decision on petrol and diesel [prices]", he added.

The RBI said that the state-owned oil companies can raise external commercial borrowings (ECBs) for working capital with minimum average maturity of 3-5 years and they don't have to mandatorily hedge all ECBs.

Blaming the Centre for the frequent spurt in price of petroleum products, Isaac said it was the Centre that hiked the taxes on petroleum products.

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