Government cuts petrol, diesel prices

Minister says decision to give relief was necessitated by uncertainty regarding international oil prices

In a relief to consumers hit hard by the unrelenting rise in fuel prices, the government yesterday cut petrol and diesel prices by Rs2.50 per litre that will result in a revenue loss of Rs105 billion (Dh5.25 billion) in six months.

It also asked the states to effect a similar cut so that the relief could be to the tune of Rs5 per litre.

Finance Minister Arun Jaitley told a press conference that the cut will be effected through slashing of excise duty to the tune of Rs1.50 per litre while the oil marketing companies (OMCs) will absorb the impact to the tune of Rs1. “I am also writing to the states to make corresponding cuts in VAT of equivalent amount so that consumers get Rs5 relief in retail prices,” he said. “The notification in this regard will be issued today and prices will be applicable immediately afterwards,” he said.

Jaitley also said the revenue impact of the decision would amount to around Rs105 billion for the rest of the fiscal, which amounts to “only 0.05 per cent of the fiscal deficit”.

Jaitley said the decision to give relief was necessitated by the uncertainty regarding the international oil prices and was made possible by betterthan-expected revenue collections. “The government’s capacity to provide relief is only when domestic factors are strong,” he said.