Soaring fuel prices sees the centre step in and announce a flat Rs. 2.50 per litre cut in fuel prices while state governments have been encouraged to match the price cut with a drop in value added taxes.
It has been reported that Oil Minister, Dharmendra Pradhan and Finance Minister Arun Jaitley met last evening to discuss concerns about rising fuel prices, especially about impacting farmers ahead of the Rabi season. And the outcome seems to be a flat Rs. 2.50 per litre cut in petrol and diesel prices. The break up of this price cut reads an excise duty cut of Rs. 1.50 per litre and the other Rs. 1.0 per litre cut is to be absorbed by oil companies. At the time of making this announcement, Arun Jaitley asked State Governments to match the price cut with a slash in value added tax. Which would mean a benefit of Rs. 5 per litre for the end customer.
The centre levies excise duty on petrol to the tune of Rs. 19.48 per litre on petrol and Rs. 15.33 per litre on diesel. Over and above this, state governments levy taxes on fuel in the form of value added taxes. All of which amounts to a huge chunk in pump prices. While those are the fixed costs. The steep rise in fuel prices owing to a four-year high crude oil price at $84 per barrel and a depreciating rupee at INR 73.77 to the dollar has resulted in the soaring fuel prices that has seen petrol price breach the Rs. 90 per litre barrier in Mumbai.
Soon after the announcement of the Rs. 2.50 per litre fuel price cut, BJP led Maharashtra and Gujarat state governments announced a Rs. 2.50 per litre fuel price cut in VAT on petrol and diesel at a state level.
Just before this announcement though, earlier this morning a hike in fuel prices at Rs. 0.15 per litre for petrol and Rs. 0.20 per litre for diesel saw fuel prices in the national capital soar to Rs. 84 per litre of petrol and Rs. 75.45 per litre of diesel.