Guwahati: On the eve of Diwali, the Government of India announced a reduction in the excise duty levied on petrol and diesel on Wednesday.
Fuel prices were sharply hiked on October 20 by state-run oil marketing companies.
According to a statement by the Centre, the reduction in excise duty on diesel will be double that of petrol. The Centre is hoping that the reduction in excise on diesel will boost the farmers’ income during the upcoming Rabi season.
The statement further read: “In recent months, crude oil prices have witnessed a global upsurge. Consequently, domestic prices of petrol and diesel had increased in recent weeks, exerting inflationary pressure. The world has also seen shortages and increased prices of all forms of energy.” “The Government of India has made efforts to ensure that there is no energy shortage in the country and that commodities such as petrol and diesel are available adequately to meet our requirements,” it added.
A fuel-driven inflation hike could, therefore, destabilise the economic recovery as prices of goods — from daily grocery to luxury products — will keep rising and consumer demand will fall as a result.
Higher inflation could also threaten the Reserve Bank of India’s plan to maintain a low interest rate regime that has helped the economy recover substantially after two waves of the pandemic pummelled growth.
Despite the risks, the government has defended collecting higher taxes on fuel. Taxes levied on fuel in India are among the highest in the world.
Meanwhile, the plan to include petroleum products under the ambit of GST, which is expected to significantly reduce petrol and diesel prices, is far from reaching a conclusion. Therefore, the two major options to reduce fuel prices are effectively out of reach at the moment.
Petrol prices on Wednesday, October 3, were as follows:
New Delhi: Rs 110.04
Kolkata: Rs 110.49
Mumbai: Rs 115.85
Chennai: Rs 106.76
