New Delhi — India has cut gasoline and diesel prices to give relief to consumers against rising global crude prices caused by uncertainty over US sanctions on Iran and OPEC's decision to raise output, Finance Minister Arun Jaitley said Thursday.
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The federal government has reduced the excise tax on both fuels by Rupee 1.5/liter ($0.02/liter).
Jaitley said state-run oil retailers such as IOC, HPCL, BPCL would also bring down gasoline and diesel prices by Rupee 1/liter across the country.
"The combined relief to a consumer will be Rupees 2.5/liter," the minister said.
In Delhi Thursday, gasoline was priced at Rupee 84/liter while diesel sold at Rupee 75./liter.
Jaitley said the price cut would be made effective across the country with immediate effect.
He said the overall relief announced in the form of Rupees 2.5/liter price cut would be revenue neutral, as the country has widened its base for direct tax revenue.
He added that the relief to the consumer would not increase the existing fiscal deficit target of 3.3% for the current fiscal year (2018-19) as the government's direct tax revenue collection rose in the fiscal first half, to September.
India's fiscal year runs from April to March.
The minister said India's states can also extend an equivalent relief on retail fuel prices by lowering local taxes.
"I will write to all the state governments to lower local taxes so that total relief to a consumer amounts to Rupee 5/liter," he said.
Just after Jaitley's announcement, two provinces -- Gujarat and Maharashtra -- announced such a move, giving consumers of gasoline and diesel a total relief of Rupee 5/liter on retail prices.
These two provinces are ruled by Jaitley's own party, Bharatiya Janta Party (BJP).
Jaitley said the tax relief announced by the federal government would have a negligible 0.05% impact on the overall fiscal deficit as increased revenue collection from direct taxes has provided a cushion against any widening of the fiscal deficit target.
Jaitley said the global crude price scenario was unpredictable due to the situation with Iran and uncertainty over OPEC's decision to raise production, calling the uncertainty bad for consuming nations like India.
"We are a net buyer and therefore buyers do suffer," Jaitley said.
India, the world's third-biggest energy consumer, meets its 80% of fuel demand via imports.
The minister said state-run oil retailers would continue with the practice of revising fuel prices on a fortnightly basis despite the recent rise in global crude prices.
"We are not going back to deregulation of oil prices as oil marketing companies will continue with the practice of price revision on a fortnightly basis," he said.
--Ratnajyoti Dutta, firstname.lastname@example.org
--Edited by James Leech, email@example.com