Government announces Rs 2.5 cut in fuel, ask state governments to do the same

In what will be a major relief to the common man of the country, Finance Minister Arun Jaitley on Thursday announced that the centre has cut the price of fuel Rs 2.5, while asking the state governments to do the same so that the cost of diesel and petrol is reduced by Rs 5 across the country.

The central government has decided to reduce the excise duty by Rs 1.5, while oil companies have been told to cut the price by Rs 1. Further, the state governments have also been asked to do the same in their respective states.

Speaking to the media after a meeting with Petroleum minister Dharmendra Pradhan, Jaitley said,

"During the inter ministerial discussions, we have decided to give relief to the consumers. After the approval of PM Modi, the relief has been decided in three ways. One, the excise duty has been cut by Rs 1.5. Secondly, the OMC's will reduce the price of fuel by Rs 1. From the central government, we have immediately cut down the price by Rs 2.5 on both petrol and diesel. Simultaneously, I am writing to the state government today that they also do the same, which means the total cut on fuel price will be Rs 5."

Both the centre and state will have to cut down the prices in equal amount. Stating that the excise duty on petrol and diesel differs from state to state, Jaitley added,

"Central revenue as you know, is a fixed revenue. It doesn't matter if crude oil is $60 or $75, we only get revenue according to the central excise duty. The excise duty for the state governments vary from one state to another. Some states have 31% VAT, some have less. The average of all states is 29%. So when the price of crude oil increases, the revenue for centre remains the same, because its a fixed amount. As for states, if the crude price increases, the price varies, and some get a lot of revenue."

In the end, the FM took a dig at those state governments who had been attacking the centre over the increase in prices of petrol and diesel, stating the 'ball is in their court now'.

"This is the time for all those states who are only criticising us for slashing oil price, ball is in their court now. They have to slash down the fuel price in their state too rather than only giving gyans with their tweets," Jaitley said.

Within minutes of his big announcement, Maharashtra and Gujarat government announced that they would ply with the centre's request, and cut the prices of fuel by the same amount.