NEW DELHI: Days after the central government announced cutting down excise duty on retail fuel prices, several states, especially those ruled by the Bhartiya Janta Party (BJP), have come forward and offered similar cut on value added tax it charges on fuel.
After this deduction, petrol price has been further reduced by as much as Rs 8.7 per litre and diesel by Rs 9.52 in these states and Union territories. Auto industry experts said that is a welcome sign for the sector where sales of two-wheelers took a big hit due to increased fuel prices.
“Its may be a big phsygolical win. Fuel prices have been skyrocketing and was acting as a deterrent to demand . Total cost of ownership has gone substantially high due to new regulations and rising commodity prices. Further hike in fuel prices was further putting a dent on sentiments. Hopefully any reduction in fuel prices will boost consuner sentiments,” said Puneet Gupta, associate director at I.H.S Markit.
Mitul Shah, head of research (Institutional Equity) at Reliance Securities, said reduced fuel prices would benefit all the vehicle categories including the price sensitive two-wheeler industry. Rising fuel prices and increased commodity prices that led to consecutive price hike had a very negative impact on two-wheeler sales.
The Union government had on Wednesday cut excise duty on petrol by Rs 5 per litre and that on diesel by Rs 10 a litre to give reprieve to consumers battered by record-high retail fuel prices.
This announcement was matched by 22 states and UTs cutting VAT rates in different proportions.
This has led to BJP and its partner ruled states witnessing steeper reductions in petrol and diesel prices in comparison to Maharashtra, Delhi, West Bengal and others governed by other parties.