Petrol, diesel prices drop sharply after Centre cuts excise duty
Fuel prices saw a considerable reduction after Finance Minister Nirmala Sitharaman's Saturday announcement of a central excise duty cut of Rs. 8/liter on petrol and Rs. 6/liter on diesel. The petrol price declined to Rs. 96.72/liter in Delhi, while diesel fell to Rs. 89.62/liter. Moreover, Maharashtra reduced the value-added tax (VAT) on petrol and diesel on Sunday by Rs. 2.08/liter and Rs. 14.4/liter, respectively.
Why does this story matter?
- The move came after opposition parties and economists criticized the government's inflation management.
- The wholesale price inflation reached a record high of 15.08% in April, while retail inflation reached a near-eight-year high of 7.79% due to rising prices across several commodities.
- Notably, prices have risen globally following the Russia-Ukraine war and supply chain disruptions, pushing the Reserve Bank of India to raise interest rates.
How much does fuel cost in major cities?
After the latest price revision, the petrol rate in Mumbai stood at Rs. 111.35/liter, and the diesel price at Rs. 97.28/liter. In Kolkata, petrol and diesel rates stood at Rs. 106.03/liter and Rs. 92.76/liter, respectively. In Chennai, petrol and diesel currently retail at Rs. 102.63/liter and Rs. 94.24/liter, respectively.
Centre to borrow Rs. 1 lakh crore after excise cut
According to a report, India will most likely borrow the whole Rs. 1 lakh crore that the Centre will forego as a result of the excise cut on fuel prices. The loss to the exchequer will have to be covered by additional market borrowings amid mounting debt, likely frightening India's bond market, where returns on benchmark 10-year notes have risen in recent months.
Statement of Finance Minister Nirmala Sitharaman
On Saturday, Finance Minister Nirmala Sitharaman tweeted, "We are reducing the central excise duty on petrol by Rs. 8/liter and on diesel by Rs. 6/liter. This will reduce the price of petrol by Rs. 9.5/liter and of diesel by Rs. 7/liter." "It will have a revenue implication of around Rs. 1 lakh crore per year for the government," she added.
Centre cutting excise duty through its own money: FM
Furthermore, in response to the Opposition's charge that the central government is cutting excise duty, which is shared by states, and duping people with a "jugglery of figures," Sitharaman said on Sunday that the excise duty deducted on petrol and diesel isn't shareable with states. According to her, the reduction was entirely funded through the Centre's Road and Infrastructure Cess (RIC).
Subsidy on gas cylinders also announced
The government would also provide a subsidy of Rs. 200 per LPG cylinder to Ujjwala Yojana beneficiaries for 12 cylinders in a year, Sitharaman announced on Saturday. The move will help alleviate some of the hardship caused by the increased cooking gas prices, she added. According to her, the gas cylinder subsidy will result in a "revenue impact of roughly Rs. 6,100 crore."
PM Narendra Modi tweets about Centre's announcement
It is always people first for us!— Narendra Modi (@narendramodi) May 21, 2022
Today’s decisions, especially the one relating to a significant drop in petrol and diesel prices will positively impact various sectors, provide relief to our citizens and further ‘Ease of Living.’ https://t.co/n0y5kiiJOh