NEW DELHI: Bowing to public pressure over rising fuel prices and in a bid to fight surging inflation, Finance Minister Nirmala Sitharaman on Saturday evening announced a Rs 8 per litre cut in excise duty on petrol and Rs 6 per litre on diesel.
"We are reducing the central excise duty on petrol by ₹ 8 per litre and on diesel by ₹ 6 per litre. This will reduce the price of petrol by ₹ 9.5 per litre and of diesel by ₹ 7 per litre," Finance Minister Nirmala Sitharaman tweeted.
India’s wholesale inflation crossed 15%—highest in 25 years. With retail inflation lower, India is at a Phillips Curve turning point with 2 risks: either small businesses will close & unemployment rise or— Kaushik Basu (@kaushikcbasu) May 18, 2022
retail inflation will rise. All policy focus should be on navigating these.
She also exhorted "all state governments, especially the states where reduction wasn’t done during the last round (November 2021), to also implement a similar cut and give relief to the common man."
The cuts will be effective from 12 am Sunday.
"It (the excise duty cut) will have a revenue implication of around ₹ 1 lakh crore/year for the government," she added.
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Also, the government will give Rs 200 per cylinder subsidy to Ujjwala Yojana beneficiaries for 12 cylinders in a year to help ease some of the burden arising from cooking gas rates rising to record levels.
Petrol in Delhi will cost Rs 95.91 a litre from Sunday as against Rs 105.41 a litre currently while diesel will cost Rs 89.67 a litre as opposed to Rs 96.67 a litre now.
A 14.2-kg LPG cylinder costs Rs 1,003 in the national capital currently. Following the announcement, Pradhan Mantri Ujjwala Yojana beneficiaries, the poor women who got free connections, will get Rs 200 subsidy directly in their bank accounts and the effective price for them would be Rs 803 per 14.2-kg cylinder.
Post the November 2021 reduction in central excise duty on petrol by Rs 5 per litre and that on diesel by Rs 10 a litre, 25 states and UTs had cut VAT to give further reprieve to consumers battered by record-high retail prices.
However, states ruled by non-NDA parties like Maharashtra, Andhra Pradesh and Tamil Nadu had not reduced VAT.
After that reduction, state-owned oil firms kept petrol and diesel prices unchanged for a record 137-day period during which international oil prices rose from USD 84 per barrel to a nearly 14-year high of USD 140.
Raise Rs 10 per litre in 2 months and cut Rs 9.50 per litre on petrol and Rs 7 per litre on diesel.This is equal to rob Peter more & pay Peter less!— P. Chidambaram (@PChidambaram_IN) May 21, 2022
FM’s exhortation to States is meaningless. When she cuts Central Excise by one rupee,41 paise of that rupee belongs to the States
They finally broke the hiatus with a Rs 10 per litre increase on both petrol and diesel in 16 days starting March 22 but again hit the freeze button after the last revision on April 6.
This despite the fact that oil prices ruled above USD 100 per barrel and the gap between cost and selling price was as high as Rs 13 a litre on petrol and Rs 24 on diesel.
"Today, the world is passing through difficult times.Even as the world is recovering from Covid-19 pandemic, the Ukraine conflict has brought in supply chain problems and shortages of various goods.This is resulting in inflation & economic distress in a lot of countries," Sitharaman said.
WPI or wholesale price inflation touched a record high of 15.08 per cent in April on price rise across all items. Retail inflation too rose to a near eight-year high of 7.79 per cent in that month, remaining above the RBI's inflation target for the fourth straight month.
The Finance Minister also announced a few other measures in a series of tweets.
"We are also reducing the customs duty on raw materials & intermediaries for plastic products where our import dependence is high. This will result in reduction of cost of final products," she said.
"Similarly we are calibrating customs duty on raw materials & intermediaries for iron & steel to reduce their prices. Import duty on some raw materials of steel will be reduced. Export duty on some steel products will be levied."
"Measures are being taken up to improve the availability of #Cement and through better logistics to reduce the cost of cement," she added.
7/12 We are reducing the Central excise duty on Petrol by ₹ 8 per litre and on Diesel by ₹ 6 per litre.— Nirmala Sitharaman (@nsitharaman) May 21, 2022
This will reduce the price of petrol by ₹ 9.5 per litre and of Diesel by ₹ 7 per litre.
It will have revenue implication of around ₹ 1 lakh crore/year for the government.
(With PTI inputs)