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Finance Minister Arun Jaitley informed the press today (04/10/2018) that the Modi government has decided to cut fuel prices and to provide a total relief of Rs 2.5 per litre on petrol and diesel in collaboration with oil companies.
According to Arun Jaitley, the government will cut excise duty by Rs 1.5 per litre on petrol and diesel, meanwhile, oil marketing companies will absorb the loss of Re. 1 per litre.
Jaitley also stated that he would write to state governments to also cut the value added tax on petroleum products by Rs. 2.5, immediately, so that consumers can receive a benefit of Rs. 5 per litre on fuel.
The fuel prices have risen as the crude oil surged to an over four-year high of US$ 86 a barrel. A weaker rupee also contributed to making imports costlier.
However, Jaitley did not stress about the fiscal implications, stating, “The impact will be about Rs 21,000 crore for the full fiscal. Since this is for the half year, the impact will be Rs 10,500 crore which is only 0.05 per cent of the fiscal deficit,” he added, “I am confident we’ll be able to maintain the fiscal deficit even after absorbing this.”
After the government asked the companies to absorb Re 1 cut on fuel prices share prices of oil companies sharply fell. At the time of writing this report, HPCL shares were down by 22.4%, BPCL was down by 18.88% and Indian Oil fell by 18.24%.
