Petrol, diesel prices slashed by Rs 2.50 per litre

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"We are writing to the state governments that as the central government is cutting Rs 2.50 on both petrol and diesel, they do the same", he added.

Speaking at a press conference on Thursday, Finance Minister Arun Jaitley announced that the cut will be effected through slashing of excise duty to the tune of Rs 1.50 per litre, while the oil marketing companies (OMCs) will absorb the impact to the tune of Re 1 per litre.

He also took a swipe at the previous Congress-led government at the Centre, saying it had "pawned" national resources by issuing oil bonds while the Narendra Modi government showed its sensitivity by reducing the prices.

The states have reduced the sales tax and VAT charged on diesel and petrol. So it is easier for states to forego a part of the additional revenue that they receive due to price increase. He said that the central government will reduce excise duty by Rs 1.5 while oil companies will absorb the remainder. So far 6 BJP-ruled states have announced the cut, including Uttar Pradesh, Maharashtra, Assam, Tripura, Gujarat, Chattisgarh.

Asked by a reporter about the economic implications of the move, Jaitley said the decision was "good economics" as it won't impact the fiscal deficit and will allow consumers to boost spending on other goods.

It had resisted the call for a reduction in excise duty since May when retail rates first shot up and then again from mid-August when fuel prices started moving up. If the Centre is serious, it should reduce the tax to what it was when it assumed office.

Brent, the benchmark for more than half the world's oil, has touched Dollars 86 per barrel mark, the highest in four years. The prices of petrol are maximum across the state, soaring above Rs 91 in many districts of the state.

Petrol was sold at 83.85 rupees a litre, while diesel was sold at 75.25 a litre on October 3, according to state-run retailer Indian Oil Corp's website. Absorbing this Rs 10,500 crore in increased collection and maintaining fiscal deficit I am confident we will be able to do that. "Inflation is still moderate less than 4 per cent", Jaitley added.

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