Petrol, diesel prices cut by Rs 2.50 after excise reduction

Petrol diesel prices to come down by Rs 2.50 govt cuts excise duty

He also asked state governments to follow suit and cut taxes by a similar amount.

Diesel, which is being sold at record high prices, is the most used fuel in the farm sector.

Bihar deputy chief minister Sushil Kumar Modi, who holds the finance portfolio, however told ANI that the state will take a decision after getting official intimation. In an oblique reference to the opposition parties, Jaitley said it will be a test for those states whose leaders were only tweeting and indulging in lip sympathy. According to reports, Karnataka Chief Minister HD Kumaraswamy said that the state government will not reduce prices anymore since it has already announced a rate cut.

The Modi government's policy of high oil taxes has become a source of political debate over the last month, with surging global oil prices no longer providing the Centre with a cushion to defend itself with. When the petrol price is about to cross Rs 92 per litre, the government has reduced Rs 5 per litre. On Thursday, October 4, the price of petrol hit the Rs 84 per litre mark in Delhi while diesel cost went Rs 80 per litre in Mumbai. "If the government wishes to stick to its glidepath of fiscal consolidation, then it will have to cut its expenditures significantly", said Rupa Rege Nitsure, chief economist at L&T Finance Holdings.

By lowering duties, the Narendra Modi government is borrowing a page from the rulebook of past governments that have lowered levies whenever worldwide oil prices shot up.

Mr Jaitley expressed hope that the states will reduce state tax on fuel along with centre's move.

Shares of oil marketing companies fell after finance minister Arun Jaitley said that the government has asked the companies to absorb Re 1 cut on fuel prices.

"Facing public ire and imminent defeat in the five election going states, Modi Government attempted to apply "band-aid" on the thousand wounds inflicted by it by massive profiteering in the prices of petrol, diesel, kerosene oil, cooking gas, CNG, PNG and natural gas". Jaitley said the total impact of Rs 1.50 cut in excise duty is about Rs 21,000 crore for full year and Rs 10,500 crore the reminder of current fiscal. Jaitley said the decision to give relief to consumers was necessitated by the uncertainty regarding the worldwide oil prices and was made possible by better-than-expected revenue collections.

The states have reduced the sales tax and VAT charged on diesel and petrol.

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