Petrol Prices Cut In The Centre – An Overview


On 4 October, 2018 that is, Thursday, the centre announced a cut of Rs.2.50 per litre on petrol and diesel prices with immediate effect. The reduced prices would become active from midnight. The news about the excise cut on the ever-rising fuel prices in the capital comes as a respite for the public as the fuel prices have been on the boil for last couple of months. The petrol prices saw a significant rise from Rs.76.31 on 1 August, 2018 to Rs.84 till today before the price cut. The situation of the diesel prices was also not much better and had seen a significant rise of Rs.67.82 on 1 August, 2018 to a steaming Rs.75.45 till today before the big news.

Th Output Of The Conference

In a recent press conference, the finance minister, Arun Jaitley has announced that the Union Government is effecting a Rs.1.50 cut on excise duty on petrol and diesel. Moreover, the government has also asked the oil marketing companies (OMC’s) to absorb a deduction Rs.1 per litre on both of the petro products. Soon after the petrol price cut in the capital the same was announced by both Gujarat and Maharashtra governments. Arun Jaitley in the press conference also said that the central government will write to all state governments to follow the same reduction in petrol and diesel prices by either cutting sales tax or value added tax (VAT). He also assured that the price cut would not impact the revenues as the tax base has had increased.

Taxes on Petrol and diesel price account up to more than a third of the retail price and hence is one of a great source of profitable income for the government. Therefore, the reduction of the excise duty would have a great impact on centre, almost up to Rs. 10,500 crores according to Jaitley. This iconic decision was taken in an important meeting that was held by the finance minister earlier in the day. It was also attended by petroleum minister and other key officials.

The Global Inflation

Jaitley has told Brent crude oil touching four-year high of $86 a barrel on Wednesday as the reason for the surge in petrol prices. Shares of the leading petroleum companies have faced a significant downfall because of the decision. Shares in Indian oil Corp, the country’s biggest oil refiner had a drop of 11.4 per cent. On one side Hindustan Petroleum Corp came close down to 13.5 per cent and on the other Bharat Petroleum Corp suffered a fall of 12.4 per cent. Reliance Industries suffered a great loss by coming down to 6.9 per cent and hence has become one of the historical bad news for the shareholders as it become their biggest single-day fall since 24 August, 2015.

The CARE ratings have told the move to be a positive one as it will placate prices and inflation thereby improving the situation. For now, the situation has improved a bit for the people but the question is for how long will it be successful in keeping the people cool in this heat of rising prices. The fact is that if the crude price continues going up and rupee is unable to stabilise its value, then this move will have a limited impact rather than providing long term benefits.


The point to ponder upon is how long will it take for rupee to stabilise and that too at what level? Another problem that is lined up is that post November when Iran sanction will kick in how high will the prices go? Because if they remain elevated then the country’s economy might have to face acute inflationary problems. So, instead of getting this momentary relief the public as well as the country’s economy would be sounder when a permanent solution to this problem is found. But instead of being disheartened we should keep believing in the potential of our country as well as the government because when they have made this price cut of Rs.2.50 possible they’ll surely try their best to provide the country’s citizens with a long term relaxation from these continuous price hikes

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