India Introduces Fuel Relief On Rising Prices At The Pump

In Kolkata, the petrol price was Rs 83.35 per litre while that of diesel was Rs 74.80 this morning.

After Centre's announcement, the Congress dared Prime Minister Narendra Modi to bring the fuel prices back to the 2014 level instead of throwing a "pittance of one or two rupees" at the public.

He also asked state governments to follow suit and cut taxes by a similar amount. The move is going to cost the exchequer about Rs 10,500 crore, which will stand at 0.05 percent of the fiscal deficit.

This year alone, petrol and diesel prices have been hiked by Rs 13.91 and Rs 15.59 respectively in the national capital.

Opposition-ruled Bengal, Kerala and Karnataka, which had cut their Value-Added Tax rates on auto fuels by Re 1 to Rs 2 per litre last month, have said they will not cut rates again.

Shares of Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd extended losses and were down as much as 24.38% to 27.96%.

"And reducing oil prices, if you say is good politics, so be it", said Mr Jaitley.

West Bengal Chief Minister Mamata Banerjee and Delhi Chief Minister Arvind Kejriwal demanded that the Centre cut excise duty by Rs 10 per litre on petrol and diesel.

The petrol and diesel prices have resumed the ascending trend today. The governments of Maharashtra, Gujarat, Chhattisgarh, Jharkhand and Uttar Pradesh - all under the rule of the Bharatiya Janata Party - have already said they will do so. Jaitley expressed confidence in maintaining the fiscal deficit target for the current financial year despite the reductions. But with a weakening rupee, it will likely have fewer options in the form of import-related tax cuts.

"In general, what's driving emerging market weakness is a stronger U.S. economy ... there is a lack of clarity on the effectiveness of rate hikes as a currency defence", said Sunil Sharma, chief investment officer with Sanctum Wealth Management.

"For oil security, we need strong OMCs. Therefore they would be in a position to absorb this", he said.

  • Eleanor Harrison