Petrol, diesel prices slashed by Rs 2.50 per litre

New Delhi: In a major relief for consumers across the country, the Centre today slashed the prices of petrol and diesel by at least Rs 2.50 per litre. The announcement was made by Finance Minister Arun Jaitely today.

“Excise duty to be reduced by Rs 1.50 & OMCs will absorb Rs 1. So, a total of Rs 2.50 will be reduced on both diesel and petrol,” said Jaitely.

Sources said the Centre has also urged the State governments to slash taxes on petrol and diesel which will is likely to further reduce the prices by at least Rs 5 per litre.

Announcing the much sought-after relief, Finance Minister Arun Jaitley told a press conference that the cut will be effected through slashing of excise duty to the tune of Rs.1.50 per litre while the oil marketing companies (OMCs) will absorb the impact to the tune of Re one.

"I am also writing to the states to make corresponding cuts in VAT of equivalent amount so that consumers get Rs 5 relief in retail prices," he said.

"The notification in this regard (giving a relief of Rs.2.50) will be issued today and prices will be applicable immediately afterwards," he said.

Following the Centre's appeal, several State governments including Tripura, Maharastra, Chhattisgarh, Jharkhand and Gujarat announced to provide give additional relief of Rs 2.50 per litre on petrol and diesel to give benefit of Rs 5 per litre to people in their respective States.

Last month, the governments of Karnataka, West Bengal, Rajasthan and Andhra Pradesh cut taxes on petrol and diesel.

Jaitley also said the revenue impact of the decision would amount to around Rs 10,500 crore for the rest of the fiscal, which amounts to "only 0.05 per cent of the fiscal deficit".

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.

"The government's aim is to give relief to the consumer by increasing their purchasing power without impacting the fiscal deficit," he said.

Jaitley said the decision to give relief to consumers was necessitated by the uncertainty regarding the international oil prices and was made possible by better-than-expected revenue collections.

"The government's capacity to provide relief is only when domestic factors are strong," he said.

It is only the international factors, primarily rising prices of crude and domestic policy and other measures like the interest rate hike by the US, which have affected India, Jaitley said adding domestic indicators were strong and stable.

Except the Current Account Deficit (CAD), which is directly linked to oil prices, all other data are encouraging, he said.

While explaining about the regulation of fuel prices after the rates were slashed today, Union Minister for petroleum and natural gas, Dharmendra PradhanPradhan mentioned that it was due to the fluctuating value of currencies across the world including Indian rupee falling sharply in comparison to the US dollar. He also attributed the rise in fuel prices to the sudden increase in crude oil prices in the international market.

“Other state governments have announced an additional relief of Rs 2.5/litre on petrol and diesel following Central Government move to slash fuel prices by Rs 2.5/ litre. I request Odisha CM Naveen to reduce Rs 2.50 as other states did,” Pradhan added.

Odisha Finance Minister Sahi Bhusan Behera on the other hand informed that state government will look into Central government's request to States to provide additional relief on fuel prices.

Earlier, responding to a query about state governments following suit with similar tax cuts, Jaitley said that this measure would be a "a test for all state governments, especially those whose leaders have been demanding cuts while paying lip service to people".

While the Centre received a fixed revenue from excise duty on oil, states imposed ad valorem VAT in percentage terms which go upto as high as 31 per cent, the minister said.

"When the prices go up the Centre receives a fixed amount per litre, whereas the revenue of states go up. So it is easier for states to forego a part of the additional revenue that they receive due to price increase.

"Last time it were only the NDA ruled states, which made the VAT reductions after the Rs 2 excise cut by the Centre last year," he said.

Transport fuel prices have continued on a daily record-breaking upward movement with petrol inching closer to Rs 84 in Delhi and having already crossed the Rs 91 a litre mark in Mumbai.

Brent crude oil hit $86 per barrel on Wednesday, recording its highest level in 4 years.

(With additional inputs from IANS)