Jaitley appealed to the states to match the Centre's effort by reducing value-added tax or VAT by Rs. 2.50 so that the total benefit to citizens is at least Rs. 5. The Gujarat Chief Minister tweeted that it has matched the central government's reduction, and that petrol and diesel are now cheaper by Rs 5 per litre.
In Delhi, where the fuel prices are the lowest among all metros and most state capital, petrol is sold at Rs 84 per litre and diesel at Rs 75.45. The effective reduction would be Rs 4.06 per litre.
Jaitley said he on Wednesday met Oil Minister Dharmendra Pradhan and inter-ministerial consultations continued on Thursday. In Mumbai, the prices of petrol and diesel rose to Rs 87.15 per litre and Rs 76.75 per litre respectively. He said that all that was done before the BJP came in was the cut down on expenditure to manage balance sheets, which in turn made the growth suffer. The governments of Maharashtra, Gujarat, Chhattisgarh, Jharkhand and Uttar Pradesh - all under the rule of the Bharatiya Janata Party - have already said they will do so.
Global fuel prices, however, have been on the rise with the worldwide benchmark Brent crude nearing a four-year high of $86 per barrel earlier this week.
Shares of Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd extended losses and were down as much as 24.38% to 27.96%.
On September 15, the government had announced an array of steps, including removal of withholding tax on Masala bonds, relaxation for FPIs, and curbs on non-essential imports, to contain the widening CAD and check the rupee fall.
The Minister expressed confidence about meeting the fiscal deficit target despite the excise duty cut, saying increased revenue collections would absorb the impact of the cuts. This means that petrol will continue to be expensive in Delhi.
"We have authorised the oil marketing companies to raise $10 billion through foreign currency oil bonds", he added. "So the impact will be Rs 10,500 crore in current fiscal which is only 0.05 per cent of fiscal deficit".