NEW DELHI: The Centre announced a reduction in petrol and diesel prices by Rs 2.50 a litre on Thursday and nudged states to match the cut through a reduction in
VAT to bring much-needed relief to citizens reeling under the burden of runaway fuel rates.
BJP-ruled states, including Uttar Pradesh, Gujarat and Haryana, apart from poll-bound MP and Chhattisgarh, responded, which will result in a reduction of the price of auto fuel in at least 12 states by Rs 5 a litre. Maharashtra announced a Rs 3.2 cut in
petrol price, but a decision on diesel is pending.
From 6am on Friday, petrol will cost Rs 81.51 per litre and diesel Rs 72.95 a litre in Delhi. While Bihar, Odisha and Punjab will take a decision soon, opposition-ruled West Bengal demanded a reduction of Rs 10 a litre. States such as Kerala and Karnataka opted to ignore the Centre’s request for lowering VAT, at least for the time being.
After holding out for nearly three months, the government decided to lower central excise on petrol and diesel by Rs 1.50 a litre and also instructed state-run oil marketing companies to pare retail prices by Re 1 a litre.
Finance minister Arun Jaitley, who announced the cut, said the move was necessitated by an increase in Brent crude oil to a four-year high of $86 a barrel on Wednesday, and seven-year-high interest rates in the US.
“This is perfectly good economics... we want consumers to spend money on other items also... and to do it without impacting the fiscal deficit is still good economics. If reducing oil prices is good politics, so be it,” Jaitley told a press conference. While the impact of US sanctions that are due to kick in on November 4 are being closely watched, price projections were factored in before the price cut that followed consultations with PM Narendra Modi and oil minister Dharmendra Pradhan.
The duty reduction will leave a Rs 10,500-crore hole in the Centre’s kitty during the current financial year with IndianOil, Bharat Petroleum and Hindustan Petroleum too bearing the brunt. The stock market responded adversely to the price cut with shares of the retailers crashing over 10%.
Jaitley said the impact on revenue would not hit the Centre’s fiscal deficit target for the current year, which is budgeted at 3.3% of GDP. “Now all states will be on test... Will have to see states where leaders were indulging in lip sympathy and tweeting, what would these states do,” the minister said, adding that states had benefited more from the rise in global crude 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. It is a panic reaction against the people’s anger,” Congress spokesperson Randeep Surjewala said.
