Petrol Diesel Prices Cut by Rs. 2.5 by Central Govt. 12 BJP states lower VAT

Published Date - 05 October 2018 03:50:03 Updated Date - 05 October 2018 03:52:55

Central government has finally reduced the prices of petrol and diesel by Rs. 2.5 to benefit mainly poor and middle class families. As per the official statement, the revenue department will absorb Rs. 1.5 per litre and OMCs will absorb Rs. 1 totalling to Rs. 2.5 per litre. The central govt. will also request the state governments to make further reductions of Rs. 2.5 by cutting VAT on fuel which will make it Rs. 5 less than the prevailing rates.

BJP-ruled states, including Uttar Pradesh, Gujarat and Haryana, apart from poll-bound MP and Chhattisgarh, responded, which will result in a reduction of the price of auto fuel in at least 12 states by Rs 5 a litre. Maharashtra announced a Rs 3.2 cut in petrol price,  but a decision on diesel is pending.

From 6am on Friday, petrol will cost Rs 81.51 per litre and diesel Rs 72.95 a litre in Delhi. While Bihar, Odisha and Punjab will take a decision soon, opposition-ruled West Bengal demanded a reduction of Rs 10 a litre. States such as Kerala and Karnataka opted to ignore the Centre’s request for lowering VAT, at least for the time being.

After holding out for nearly three months, the government decided to lower central excise on petrol and diesel by Rs 1.50 a litre and also instructed state-run oil marketing companies to pare retail prices by Re 1 a litre.

Finance minister Arun Jaitley, who announced the cut, said the move was necessitated by an increase in Brent crude oil to a four-year high of $86 a barrel on Wednesday, and seven-year-high interest rates in the US.

“This is perfectly good economics... we want consumers to spend money on other items also... and to do it without impacting the fiscal deficit is still good economics. If reducing oil prices is good politics, so be it,” Jaitley told a press conference. While the impact of US sanctions that are due to kick in on November 4 are being closely watched, price projections were factored in before the price cut that followed consultations with PM Narendra Modi and oil minister Dharmendra Pradhan.

The duty reduction will leave a Rs 10,500-crore hole in the Centre’s kitty during the current financial year with IndianOil, Bharat Petroleum and Hindustan Petroleum too bearing the brunt. The stock market responded adversely to the price cut with shares of the retailers crashing over 10%.

The finance minister also clarified that the central government will not go back on deregulation of fuel prices. "We have to react to the situation and give relief without impacting fiscal deficit. We cannot do it at the cost of fiscal position and give it when it can absorb it," he said.

Petrol Diesel Prices Slashed by Rs. 2.5 by Central Govt.

Finance Minister of India has announced that the central govt. has decided to cut petrol diesel prices by Rs. 2.5 to benefit citizens. Revenue department and oil marketing companies will absorb this amount as the prices of crude oil are consistently rising in the international market. State govt. are also requested to reduce value added tax (VAT) on the fuel prices by Rs. 2.5 to provide an overall relief of Rs. 5 for citizens.

This is a long term demand from the common man as the central govt. had previously raised excise duty on petrol by Rs. 11.77 per litre and that on diesel by Rs. 13.47 per litre b/w Nov 2014 to Jan 2016. Previously, the prices were slashed by Rs. 2 per litre in the month of October last year.

The hike in excise duties has led to an increased excise collections from petro goods. This accounts to more than doubling the amount in the previous 4 years from Rs. 99,184 crore in 2014-15 to Rs. 2,29,019 core in 2017-18. Moreover, the state govt. has also earned revenue from petro goods rise from Rs. 1,37,157 crore in 2014-15 to Rs. 1,84,091 crore in 2017-18.

Moderate inflation currently standing at less than 4% and higher tax collections has given the comfort on the fiscal front.

Rs. 5 Cut in Petrol Diesel Prices as States Reaction to Center’s Move

Various states have responded very positively on the central govt’s move. Now the prices are slashed by Rs. 5 in several states and the names of these states includes:-

  • Maharashtra
  • Gujarat
  • Tripura
  • Jharkhand
  • Assam
  • Uttar Pradesh
  • Madhya Pradesh
  • Haryana
  • Himachal Pradesh
  • Uttarakhand
  • Chhattisgarh

The central government has taken several measures to tackle the rising fuel prices. Reserve Bank of India (RBI) had previously allowed the Oil Marketing Companies (OMCs) to raise dollars directly from the overseas market capping it at $10 billion.

 


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