Centre challenges non-BJP states to cut Value-Added Tax on fuel

FM Arun Jaitley addressing a press conference at North Block in New Delhi

State-run refiners will also cut the price they charge by 1 rupee per litre.

For almost a month, union ministers had insisted there would be no cut in prices of petrol and diesel, but the Narendra Modi government on Thursday succumbed to the pressure built not just by the farmer protest, but to voices within the Bharatiya Janata Party (BJP). Some states had announced cuts of varying magnitudes earlier. The Centre has cut excise duties only twice in the past 22 months - once in October previous year when it cut the duty by Rs 2 a litre and now by Rs 1.50. The Modi government has raised it to Rs 19.48 per litre. The states where the prices have been decreased are Gujarat, Chhattisgarh, Tripura, Jharkhand, Uttar Pradesh, Madhya Pradesh, Maharashtra, Himachal Pradesh, Haryana, Assam, Arunachal Pradesh, Uttarakhand, Jammu and Kashmir and Goa, said reports. If the Centre is serious, it should reduce the tax to what it was when it assumed office.

Meanwhile India's finance minister Arun Jaitley has indicated that the government plans to draw on other indirect taxes like the GST to offset the additional burden on the government revenues, but in recent years the BJP government has relied heavily on taxes collected on petrol and diesel to prop up India's fiscal deficit which had widened to 4.4% of GDP as of March 2014.

Yet now that the higher oil prices have combined with a falling rupee after the latest quarterly economic growth figures turned out disappointing, with the deficit widening, India is facing a serious challenge in sustaining its growth while reducing the adverse impact of the latest oil market developments.

Fuel prices cut by ₹2.50 ($.034) a litre in several states across India.

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While most people had a laugh about the government lowering fuel prices by just Rs 2.50 per litre, some people praised the government for doing so.

On May 16, 2014, the price of crude oil was 107.09 U.S. dollars per barrel.

Nearly half of the fuel price is made up of taxes.

"Since May 2014, the Modi government has increased central excise duty 12 times".

A CPI statement pointed out that some states, including Kerala, have already reduced the state levy on petroleum products by Rs 2. That's aimed at checking a rise in retail prices which hit new highs every day as the Brent crude surged 28 percent his year.

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