Immediately after the announcement, and the declaration by the Finance Minister, three states have responded, and reduced the price of petrol and diesel by Rs 2.5, thereby making the overall reduction to Rs 5 per litre.
It had resisted the call for a reduction in the excise duty since May when retail rates first shot up and then again from mid-August when fuel prices started moving up again. Jaitley also urged state governments to further reduce VAT and other state-level taxes to further drop the price.
However, fuel will cost Rs 5 per litre lesser with immediate in six states - Uttar Pradesh, Gujarat, Maharashtra, Chhattisgarh, Tripura and Assam - where state governments have further cut Value-Added Tax by Rs 2.50 per litre.
While all other states effected the cut on both petrol and diesel, the Maharashtra government has slashed prices only on petrol and is considering a similar cut on diesel.
Welcoming the decision of the Central government, Haryana Finance Minister Abhimanyu said the Haryana government has also chose to reduce Value Added Tax (VAT) on petrol and diesel by about Rs 2.50 per litre, reported IANS. However, India's domestic indicators are quite strong and stable.
"We (Bengal government) have already reduced fuel prices".
Read here: NDA-ruled states cut fuel rates by further Rs 2.50 per litreThe opposition parties however were not impressed.
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Justifying the minimal relief in fuel prices, Jaitley said "We have to react to the situation and give relief without impacting the fiscal deficit". Mumbai, for instance, saw the price of petrol cross the Rs 90/litre barrier while the cost of diesel had also breached the Rs 80/litre mark.
The RBI said that the state-owned oil companies can raise external commercial borrowings (ECBs) for working capital with minimum average maturity of 3-5 years and they don't have to mandatorily hedge all ECBs.
BJP president Amit Shah congratulated all the BJP-ruled states for slashing the fuel prices.
Former finance minister P Chidambaram termed the decision as "tokenism".
"When the prices go up the Centre receives a fixed amount per litre, whereas the revenue of states go up". He said the Kerala government wants the Centre to remove taxes on petrol and diesel that were imposed when the BJP-led government imposed in 2014 after coming to power. The centre levies a total of Rs 19.48 per litre of excise duty on petrol and Rs 15.33 per litre on diesel.
Brent, the benchmark for more than half the world's oil, has touched United States dollars 86 per barrel mark, the highest in four years.