In a bid to reduce the impact of persisting bullish crude oil prices on the Indian economy, India cut the retail prices of petrol and diesel by Rs 2.50 per liter, country’s finance minister Arun Jaitley said on Thursday (4).
The decrease in the fuel prices is a result of a reduction in the excise duty of Rs 1.50 per litre with crude oil companies taking an income hit of one rupee a litre, the minister added.
Jaitley noted that the excise duty cut would have an impact of Rs 105 billion on federal government's tax revenues.
The finance minister has also asked all state governments to reduce the value-added tax (VAT) on fuel by a further Rs 2.50 a litre in a bid to support common man. “I hope all state governments do this, and they announce this so that consumers benefit by five rupees,” Jaitley said speaking to the journalists.
Taxes on petrol and diesel in India, account for higher than a third of retail fuel rates, are the biggest revenue source of the government.
India, the world’s third-largest crude oil importer, depends on foreign countries to meet 80 per cent of its fuel requirements.
Jaitley noted that the decision to cut fuel prices came after Brent crude oil was seen touching four-year high of $86 per barrel Wednesday (3) and the interest rates in the US touching a seven-year high.
Except current account deficit (CAD), inflation in the country is still moderate rate at less than four per cent and higher direct tax collection gives some relief with regard to fiscal deficit, the minister said highlighting domestic macroeconomic indicators are powerful and stable.
Petrol prices in New Delhi were seen ruling at Rs 84 whereas diesel was being sold at Rs 74.45 a liter as on Thursday (4).
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