Centre, NDA-ruled states slash fuel prices; opposition says not enough

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After the minister's announcement, may states including Jharkhand, Gujarat and Chhattisgarh too announced a reduction in fuel prices.

The share prices of oil marketing companies like Hindustan Petroleum Corporation Ltd plunged immediately, down by as much as 12% in initial trading after Jaitley's remarks.

Prime Minister Narendra Modi's ruling Bharatiya Janata Party is facing a tough election in three key states this year, followed by a national election which is due by May.

Jaitley said it will be a test for those states whose leaders were only tweeting and indulging in lip sympathy.

The Government will request state governments to cut down, he said.

Maharashtra, Gujarat and the other BJP ruled states were quick to hear him.

The state of Karnataka, who earlier slashed fuel prices by Rs 2, will not be announcing any more cuts.

The hike pushed petrol price in Delhi to an all-time high of Rs 84 per litre and diesel to Rs 75.45.

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Following this, the Gujarat and Maharashtra Governments announced additional relief of Rs2.5/litre Petrol/Diesel. "Then we will also step in", Mr Issac said.

"Excise duty to be reduced by Rs 1.50 and OMCs will absorb 1 rupee".

While the Centre received a fixed revenue from excise duty on oil, states imposed ad valorem Value-Added Tax in percentage terms which go upto as high as 31 per cent, the minister said.

The Minister expressed confidence about meeting the fiscal deficit target despite the excise duty cut, saying increased revenue collections would absorb the impact of the cuts.

Reactions to the central government's decision to reduce fuel prices by Rs 2.50 on Thursday ranged from adulatory to dismissive ones.

Brent oil on Wednesday crossed $86 per barrel, which is the highest in the last four years, and rising interest rates in the United States have a significant impact across global markets, said Jaitley.

Taxes on petrol and diesel, which account for more than a third of retail fuel prices, are one of the biggest sources of income for the government, which is seeking to keep the country's budget deficit in check. "So, a total of Rs 2.50 will be reduced on both diesel and petrol", said Jaitely.

By lowering duties, the Narendra Modi government is borrowing a page from the rulebook of past governments that have lowered levies whenever worldwide oil prices shot up. "Each and every state has their own situation [sic], so first, let the letter come". "The Centre should reduce prices by at least Rs 10".

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