The government has decided to reduce the Central excise duty on petrol by Rs 8 per litre and on diesel by Rs 6 per litre in order to reduce the inflationary pressure. This was announced by Finance Minister Nirmala Sitharaman on Saturday.
While fixing the retail prices of petrol and diesel, states apply VAT on excise duty. A cut in excise will automatically lead to a reduction in VAT. This will reduce the price of petrol by Rs 9.5 per litre and of diesel by Rs 7 per litre in Delhi. Prices will get reduced in other states, too, as per the VAT rates applicable there.
Inflation has been reaching record highs in recent months especially due to the hike in diesel prices. Retail inflation has been increasing continuously since October 2021. And since January, it has been above the RBI-mandated ceiling of 6 per cent for four consecutive months. In April, it surged to an eight-year high of 7.79 per cent. The wholesale price inflation has been above 10 per cent for 12 months. It reached 15.08 per cent in April.
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The last excise cut had been made on November 4 last year — Rs 4 per litre on petrol and Rs 10 per litre on diesel. Some states had reduced VAT, too, at that time. Subsequently, there had been no price hike until the Assembly election results came in March. Since then, however, there has been a steep hike in prices.
The government will give a subsidy of Rs 200 per gas cylinder (up to 12 cylinders) to over 9 crore beneficiaries of the Pradhan Mantri Ujjwala Yojana. The prices of domestic gas cylinders have gone above Rs 1,000. And the commercial cylinders are priced at about Rs 2,500.
The Centre is also reducing the customs duty on raw materials and intermediaries for plastic products where our import dependence is high, said the Finance Minister. She stated that import duty on some raw materials of steel will be reduced and export duty on some steel products will be levied.