Finance Minister Niramala Sitharaman on Saturday announced that the government would be reducing excise duty on petrol by ₹8 and diesel by ₹6 per litre respectively and provide a ₹200 per cylinder subsidy on liquified petroleum gas (LPG).
The government has stated that the consequent reduction in the prices of petrol and diesel would likely ₹9.5 and ₹7 per litre respectively.
The fiscal setback to the government would be to the tune of ₹1 lakh crore, according the finance minister's tweet. Sitharaman has also urged state governments to follow suit.
Excise duty is the central levy on petrol and diesel, which stood at ₹27.9 per litre on petrol and ₹21.8 litre on diesel before the cut; with the last such cut in excise coming on the eve of Diwali. The state governments levy value-added tax on fuel, and any additional levies, which vary from state to state.
Starting March 22 this year, fuel prices saw near daily hikes that went on till April 6, rising just below 10 percent at petrol pumps (as in New Delhi) over this time, after settling at increased highs, according to data with the Petroleum Planning and Analysis Cell of the Ministry of Oil and Natural Gas.
This measure was one in a slew of steps that seem to be aimed at cushioning prices after recent inflation data showed prices increasing to multi-year highs. In April, inflation, as measured by the consumer price index, increase by 7.79 percent year-on-year, which is an 8-year high. Wholesale prices too crossed 15 percent for the month of April.
To keep energy prices low, Sitharaman also announced a ₹200 per cylinder subsidy up to 12 cylinders under the Ujjwala Yojana. It has 9 crore beneficiaries, and is expected to cost the government ₹61,000 crores.
The other steps introduced by Sitharaman included an additional outlay of ₹1.1 lakh crores is being sanctioned towards fertiliser subsidies in addition to what has been sanctioned in the Union Budget.
Other measures for industry include:
- A customs reduction on raw materials for plastic products to cut the cost of the final product
- A customs cut in the raw materials needed for iron and steel. Further, an export duty on some steel products to be levied (to keep more stock with India)
- Cement prices are also being taken into account, with the Centre aiming to increase the availability of the product through improved logistics
Sitharaman's announcements can be seen here.
To keep food prices in check, which galloped faster than overall consumer prices over the last months, the government took a policy turnabout and banned the export of wheat with certain caveats.
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