The state governments in Maharashtra, Gujarat, Chhattisgarh, Jharkhand and Tripura today reduced the prices of petrol and diesel by Rs 2.5 soon after the Finance Minister Arun Jaitley announced a similar cut in fuel prices. He said that the central government will reduce excise duty by Rs 1.5 while oil companies will absorb the remainder.
The prices of petrol and diesel will become cheaper immediately by Rs 2.50 per litre, with the Modi government on Thursday announcing a small cut in central taxes on fuel.
Meanwhile, Maharashtra, Gujarat Government also made a decision to give additional relief of ₹2.5/litre on Petrol to give total benefit of ₹5/litre in the State.
The states have reduced the sales tax and VAT charged on diesel and petrol.
"It will be clear after this, which States mean what they write and actually implement the Value-Added Tax cut", Mr. Jaitley said. Kerala was one of the first states to cut excise duty.
Thanking Prime Minister Narendra Modi and Union Finance Minister Arun Jaitley, Fadnavis said the reduction in fuel prices will give a huge relief to citizens. Jaitley further said that the ruling party and oil firms will deal with the price reduction by Rs 1.50 and Rs 1 respectively. Jaitley said he on Wednesday met Oil Minister Dharmendra Pradhan and inter-ministerial consultations continued on Thursday.
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"The states' revenue increases because of increased crude oil prices and hence it is easier for the states to absorb Rs 2.50", he said.
Since mid-August, the petrol price has risen by Rs 6.86 a litre and diesel by Rs 6.73 - the most in any six-week duration after the daily price revision was introduced in mid-June previous year.
Jaitley, however, downplayed fiscal implications around the fuel price cut. Brent crossed $86 per barrel and this is the highest in the last four years.
Diesel is being sold at Rs 75.45 per litre in New Delhi, Rs 79.79 per litre in Chennai and Rs 77.30 per litre in Kolkata.
Fuel prices have been consistently hitting record highs since mid-August.
"The impact will be about Rs 21,000 crore for the full fiscal". He said on Twitter, "I congratulate the chief ministers of all the BJP-ruled states for this sensitive decision that will give relief to the public".