The Gujarat government also announced reduction of petrol and diesel prices by Rs 2.50 per litre. Rupani also announced that petrol and diesel would be cheaper by Rs 5 cheaper in Gujarat. So it is easier for states to forego a part of the additional revenue that they receive due to price increase.
With this decision, fuel prices in several states like Maharashtra, Gujarat, Chattisgarh, Madhya Pradesh and Uttar Pradesh will come down by Rs 5.
Finance Minister Arun Jaitley said the excise duty cut would have an impact of Rs 10,500 crore on central government's tax revenues.
Excise duty to be reduced by Rs.1.50 & OMCs will absorb 1 rupee.
Last month, Rajasthan, Karnataka and Andhra Pradesh had reduced Value-Added Tax to cushion consumers for a spate of price increases. He added that the last time that the Centre asked states to provide relief to the common man "only BJP or NDA allies-led states" did that.
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. Also, the rupee dropped to its lowest ever level of 73.77 against the dollar, resulting in expensive crude imports.
"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". Diesel prices in Chennai increased by 22 paise to Rs 79.79 a litre and by 20 paise to Rs 77.30 per litre in Kolkata.
Maharashtra charges the highest sales tax and VAT on petrol at 39.12 per cent.
"The government's move is positive as it will placate prices and inflation, said rating agency Care".
This rapid tax escalation more than doubled its excise collections from petro goods in the last four years - from Rs 99,184 crore in 2014-15 to Rs 2,29,019 crore in 2017-18.