Finance Minister Arun Jaitley today unveiled a plan which would drop the petrol and diesel prices at least Rs 2.5 per litre.
As part of Jaitley's three-point plan, the cut in petrol and diesel prices may even extend to Rs 5 per litre and he asked the state governments to do the same.
The first point of this plan said that the Centre is cutting the excise duty it charges on petrol and diesel by Rs 1.5 per litre.
The second aspect of the plan considers Oil Marketing Companies (OMCs) who will simultaneously take a Re 1 per litre hit on their revenue.
Union Finance Minister Arun Jaitley while Speaking to the media after a meeting with Petroleum minister Dharmendra Pradhan said, "During the inter ministerial discussions, we have decided to give relief to the consumers. After the approval of PM Modi, the relief has been decided in three ways. One, the excise
duty has been cut by Rs 1.5. Secondly, the OMC's will reduce the price of fuel by Rs 1. From the central government, we have immediately cut down the price by Rs 2.5 on both petrol and diesel. Simultaneously, I am writing to the state government today that they also do the same, which means the total cut on fuel price will be Rs 5."
Jaitley moreover stated that the centre and state will have to reduce the prices in equal amount as the excise duty on petrol and diesel differs from state to state. "Central revenue as you know, is a fixed revenue. It doesn't matter if crude oil is $60 or $75, we only get revenue according to the central excise duty.
The excise duty for the state governments varies from one state to another. Some states have 31% VAT, some have less. The average of all states is 29%. So when the price of crude oil increases, the revenue for centre remains the same, because of its a fixed amount. As for states, if the crude price increases, the price varies, and some get a lot of revenue," said Jaitley.
After this announcement Uttar Prdesh, Tripura, Jharkhand and Assam reduced the price by Rs 2.5 per litre.