Eight states announce additional cuts after Center reduces fuel prices

NATIONAL | October 4, 2018:

HIGHLIGHTS

• Eight of the 19 states where the party is in power had announced cuts within three hours of the Finance Minister's announcement.
• Petrol and diesel will be five rupees cheaper per liter in various BJP-ruled states as they cut an additional Rs 2.5 on the fuels

After Finance Minister Arun Jaitley announced that the Centre was reducing fuel prices by Rs 2.5 per litre, BJP-ruled states are announcing additional cuts. Eight of the 19 states where the party is in power had announced cuts within three hours of the Finance Minister's announcement. The Congress has mocked it as a "panic reaction ahead of elections."

Petrol and diesel will be five rupees cheaper per liter in various BJP-ruled states as they cut an additional Rs 2.5 on the fuels, as Union finance minister Arun Jaitley Thursday announced a Rs 2.5 cut in per liter price on the fuels, and asked states to make a matching reduction. Maharashtra and Gujarat first announced they too were reducing prices by Rs 2.5 per liter, followed by Jharkhand, Tripura, Madhya Pradesh, Uttar Pradesh, Rajasthan, and Assam.

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Uttar Pradesh chief minister Yogi Adityanath, addressing a press conference, said that as the Centre's reducing fuel prices "will give a great relief to the common man", his government has also decided to give additional relief of Rs. 2.5 per liter on the prices of petrol & diesel".

Maharashtra chief minister Devendra Fadnavis said that his government also decided to make a matching cut as this would be a "great relief" to the people. "The Central government and state government are working together to give more & more relief to the people," he told ANI.

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Gujarat chief minister Vijay Rupani, in a tweet, also announced that the state has also decided to reduce Rs.2.5 on both fuels to make them cheaper by Rs 5 while his Jharkhand counterpart Raghubar Das told ANI that the state government has decided to give an additional relief of Rs 2.5 per liter on diesel in the state.

Chhattisgarh, Assam, and Tripura also made a reduction of Rs 2.5 to make both fuels cheaper by Rs 5.

Bihar deputy chief minister Sushil Kumar Modi, who holds the finance portfolio, however told ANI that the state will take a decision after getting official intimation.

Announcing the cut in Delhi, finance minister Jaitley said the Centre would reduce the excise duty by Rs 1.5 per litre while oil marketing companies would absorb the rest Re 1 per litre.

He said the reduction in fuel price wasn't bad economics.

"This is perfectly good economics… we want consumers to spend money on other items also… to do it without impacting the fiscal deficit is surely good economics," he announced after an inter-ministerial discussion with petroleum ministry.

"If reducing oil prices is good politics, so be it," he said.

On Thursday, petrol and diesel prices in Delhi were Rs 84 per liter (increase by Rs 0.15) & Rs 75.45 per liter (increase by Rs 0.20) while in Mumbai, they were Rs 91.34 liter (increase by Rs 0.14) & Rs 80.10 (increase by Rs 0.21), respectively.

On the center's recommendation to the states, Jaitley said: "Now all states will be on test… Will have to see what states where leaders were indulging in lip sympathy and tweeting, what would these states do".

The minister recalled that the central government had reduced taxes on fuel last October by Rs 2 and only states ruled by the BJP-led NDA coalition had announced a matching cut in state taxes.

This time, he expected the NDA-ruled states to follow suit and reduce the state's value-added taxes.

He insisted that telling oil marketing companies to absorb Re 1 didn't imply going back on deregulation of prices. "But the fact is that we have to react to a situation…if without impacting the fiscal deficit I can give relief, and I had always said that our ability to give relief will not be at the cost of fiscal deficit," he said.

Jaitley said the move followed Brent crude oil touching four-year high of USD 86 a barrel Wednesday and interest rates in the US reaching the seven-year high.

Inflation in India, however, is still moderate at less than 4 percent and higher direct tax collections give comfort with regard to fiscal deficit, he said adding domestic macroeconomic indicators are strong and stable, except for current account deficit (CAD).

The cut, which comes ahead of assembly elections in five states — Rajasthan, Madhya Pradesh, Chhattisgarh, Telangana, and Mizoram, will cost the exchequer Rs 10,500 for the remaining half of this financial year.