Government has decided to reduce the central excise duty levied on petrol and diesel by Rs 1.50 in light of the skyrocketing fuel prices to ease the burden on the consumers. In addition to this, the oil marketing companies (OMCs) will cut their prices by Re 1, resulting in an effective fuel price cut of Rs 2.50.
"We will slash excise duty by Rs 1.50, and the OMCs will factor in a decline of Re 1 in their pricing. Central government will extend an immediate relief of Rs 2.50 on both petrol and diesel to the consumers," Finance Minister Arun Jaitley said during the press conference on Thursday.
The excise duty cut will be made official via a notification today itself, whereas the same for the OMCs will be released shortly, Jaitley said.
"Simultaneously, I am writing to state governments today that they should also absorb an equivalent amount through VAT as the Central government. States have experienced a jump in revenue with the increase in fuel prices, which makes it easier for them to absorb the impact of a price cut. They only have to forego a part of the additional revenue that they get due to the price increase," Jaitley further added.
Right after the excise duty cut by the Central government, state governments of Maharashtra and Gujarat also announced a relief of Rs 2.50 over local taxes on transportation fuels. Jaitley said that chief ministers will be consulted and asked to announce a decline of Rs 2.50 in local VAT so that consumers can get a relief of Rs 5 on petrol and diesel prices as soon as possible.
Jaitley further mentioned that the excise duty cut of Rs 1.50 will put a burden of Rs 10,500 crore on the government for the remainder of the fiscal, which is only 0.05 per cent of the fiscal deficit. "We are confident that we will able to absorb this burden with the help of increased collections," he said.
"The Brent oil since yesterday has crossed 86$/bbl which is the highest in the last four years. Along with this is the additional development that in the US the interest rates have climbed to 3.2 per cent, which is also highest ever. Now, both these developments have led to a situation where there is a significant impact across global markets that we have seen today. Already a large number of steps have been taken in this regard," Jaitley said.
Listing the steps taken by the government recently, Jaitley mentioned slashing government borrowing this year by almost Rs 70,000 crore authorising the OMCs to raise $10 billion through foreign currency oil bonds, and replacing the IL&FS board.
"The government is determined to make sure that since this is an internal factor to India, this should be contained quickly so that no adverse impact of it is left," Jaitley said regarding the troubles at IL&FS.
Edited by Vivek Punj