Petrol, diesel prices cut by Rs 2.50 per litre

Shares of oil marketing companies fell after finance minister Arun Jaitley said that the government has asked the companies to absorb Rs 1 cut on fuel prices

Gujarat government reduced petrol and diesel prices by Rs 2.50 per litre, while Maharashtra lowered petrol price by 2.50 per litre. BJP-ruled Gujarat, Tripura and Chhattisgarh governments have also announced a similar reduction in oil prices. Top sources said that the state government is also considering a reduction in the prices of diesel.

The Communist Party of India- Marxist (CPI-M) led Left Democratic Front government in Kerala on Thursday, 4 October ruled out slashing the cess on petrol and diesel to match the Centre's announcement in fuel price cut.

The move by the central and state governments will cost the exchequer a significant amount but will provide relief for consumers.

India's government has introduced a fuel relief as prices at the pump rise inexorably, following soaring worldwide benchmarks, Indian media report, citing the official statement by Finance Minister Arun Jaitley. In Mumbai, the prices of petrol and diesel rose to Rs 87.15 per litre and Rs 76.75 per litre respectively.

"By asking the oil marketing companies to absorb the price hike, the government is giving a signal that it can interfere at anytime in a deregulated market in the larger public interest", said Gagan Dixit, a senior analyst with Elara Capital.

BJP chief Amit Shah said the decision showed the government's sensitivity towards welfare.

The CPI said the price cut was a joke played on the people of India in the festival month.

"Respected Modiji, the common man is very distressed over skyrocketing prices of petrol and diesel". This will reduce the overall price by about Rs 5. He urged the state governments to cut the Value-Added Tax on fuel by an equal amount so that the fuel prices go down by Rs 5 per litre.

Jaitley said the move followed Brent crude oil touching four-year high of Dollars 86 a barrel Wednesday and interest rates in United States reaching seven-year high. The chief minister said that the Maharashtra government has a positive stand on bringing petrol and diesel under the ambit of Goods and Services Tax. Jaitley expressed confidence in maintaining the fiscal deficit target for the current financial year despite the reductions. Absorbing this Rs 10,500 crore in increased collection and maintaining fiscal deficit I am confident we will be able to do that.

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