Published: Sat, October 06, 2018
Markets | By Jeffery Armstrong

What Consumers Pay For Petrol, Diesel After Price Cuts

What Consumers Pay For Petrol, Diesel After Price Cuts

After months of rising fuel prices with record high petrol and diesel prices in major Indian cities, the Indian government has finally intervened, cutting petrol and diesel prices by ₹2.50 ($.034) a litre in several states across India.

The move has come as a relief to commuters who were expecting the prices, at the current rate, to cross Rs 90 per litre for petrol and Rs 85 per litre for diesel.

Finance Minister Arun Jaitley said the excise duty cut would have an impact of Rs 10,500 crore on central government's tax revenues. Petrol in Maharashtra had crossed Rs 91 per litre and diesel was selling above Rs 80 per litre before the state and central government chose to lower taxes. He said, the centre has allowed oil companies to raise 10 billion dollars through bonds.

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The price cuts would be effective from midnight tonight. West Bengal, Karnataka, Rajasthan and Andhra Pradesh states had recently themselves cut Value-Added Tax on fuels.

Prime Minister Narendra Modi's ruling Bharatiya Janata Party is facing a tough election in three key states this year, followed by a national election which is due by May.

The price cut sparked fears of the country going back toward the regulated regime where the prices of diesel and petrol were controlled by the government.

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Jaitley made this announcement at a surprise press conference in New Delhi where he once again, blamed worldwide crude prices for the near-daily rise in petrol and diesel prices. On Thursday, October 4, the price of petrol hit the Rs 84 per litre mark in Delhi while diesel cost went Rs 80 per litre in Mumbai.

Yet now that the higher oil prices have combined with a falling rupee after the latest quarterly economic growth figures turned out disappointing, with the deficit widening, India is facing a serious challenge in sustaining its growth while reducing the adverse impact of the latest oil market developments. A 13 percent depreciation in the Indian rupee had only made fuel imports costlier. Brent crossed $86 per barrel and this is the highest in the last four years. Jaitley expressed confidence in maintaining the fiscal deficit target for the current financial year despite the reductions.

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