Central minister Arun Jaitley has also urged state governments to cut down state-VAT to reduce petrol prices further by about Rs 2.5. Chief minister Raman Singh announced the decision to reduce Value-Added Tax so that the total benefit of Rs five could be passed on to the citizens.
Finance Minister Arun Jaitley in a press conference announced a cut in excise duty on fuel prices by Rs 2.50. 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.
Jaitley said he on Wednesday met Oil Minister Dharmendra Pradhan and inter-ministerial consultations continued on Thursday. So it is easier for states to forego a part of the additional revenue that they receive due to price increase.
"Excise duty to be reduced by Rs 1.50 and OMCs will absorb 1 rupee". The governments of Maharashtra, Gujarat, Chhattisgarh, Jharkhand and Uttar Pradesh - all under the rule of the Bharatiya Janata Party - have already said they will do so. Jaitley expressed confidence in maintaining the fiscal deficit target for the current financial year despite the reductions. If it is serious, it should reduce the tax to what it was when it assumed office.
Karnataka and Kerala have said that they will not be cutting state-imposed taxes on petrol and diesel.
He said on May 16, 2014, the price of crude oil was United States dollars 107.09 per barrel and the present price of global crude is USD 86 per barrel, with the average crude price during 52 months of Modi government being USD 58 per barrel, almost 45 pc less than the UPA tenure.
In the National Capital Region (NCR), petrol is being sold at Rs 84 per litre, diesel is being sold at Rs 75.45 per litre.
This led to its excise collections from petro goods more than doubling in last four years - from Rs 99,184 crore in 2014-15 to Rs 2,29,019 crore in 2017-18. "Consequently, we are hoping for a Rs 5 per litre reduction", the finance minister said.
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".