India is cutting prices of petrol and diesel by 2.50 rupees ($0.03) a litre, Finance Minister Arun Jaitley said on Thursday, the government's latest step to tackle the impact of a sharp rise in crude oil prices and a weak local currency.
Central Government has finally made a decision to stop the arrest of increasing Fuel Prices.
Jaitley also said that the Finance Ministry is writing to the state governments to cut Rs 2.50 from the Value-Added Tax imposed on petrol and diesel prices.
In a couple of hours, several BJP-ruled states also announced a matching Rs 2.50 cut, taking the total reduction to Rs 5. The Gujarat Chief Minister tweeted that it has matched the central government's reduction, and that petrol and diesel are now cheaper by Rs 5 per litre. "The government's capacity to provide relief is only when domestic factors are strong", he said.
The price cut is likely to result in a loss of margin of 70-72 billion Indian rupees on auto fuel sales, according to K Ravichandran, senior vice president, corporate ratings, at ratings agency ICRA Ltd. Mr Jaitley then urged the states to follow suit after which seven states announced cuts in petrol and diesel rates.More news: Amazon ‘Fire TV Stick 4K’ and ‘Alexa Voice Remote’ in India
Brent oil on Wednesday crossed $86 per barrel, which is the highest in the last four years, and rising interest rates in the U.S. have a significant impact across global markets, said Jaitley. Mr Adityanath said that the state will take an annual revenue cut of Rs 4,000 crore as it passes on the relief in petrol, diesel rates to consumers.
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.
Except the Current Account Deficit (CAD), which is directly linked to oil prices, all other data are encouraging, he said.
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.
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However the opposition-ruled states refused to toe the Centre's line.
Brent crude oil hit $86 per barrel on Wednesday, recording its highest level in four years.
"The Centre had hiked excise duty by ₹10 and reduced it by only ₹2.50".
Karnataka chief minister HD Kumaraswamy said he would not reduce taxes on fuel.More news: Tesla 3Q production numbers up but can they be sustained?