The Communist Party of India- Marxist (CPI-M) led Left Democratic Front government in Kerala on Thursday, 4 October ruled out slashing the cess on petrol and diesel to match the Centre's announcement in fuel price cut.
The price cut would be effective from midnight tonight. "First we will see the order then make a decision on petrol and diesel". But growing public anger over surging fuel prices has caught the attention of the government.
The Minister expressed confidence about meeting the fiscal deficit target despite the excise duty cut, saying increased revenue collections would absorb the impact of the cuts. Top sources said that the state government is also considering a reduction in the prices of diesel.
While it may seem the Indian government certainly has room for slashing taxes further on fuels, the recent cut is estimated to cost the government ₹2.7 trillion.
Taxes on petrol and diesel, which account for more than a third of retail fuel prices, are one of the biggest sources of income for the government, which is seeking to keep the country's budget deficit in check.
Jaitley said he on Wednesday met Oil Minister Dharmendra Pradhan and inter-ministerial consultations continued on Thursday. Here's a quick look at fuel prices in major cities of India as per the Indian Oil Corporation prices for petrol and diesel.
Jaitley said it will be a test for those states whose leaders were only tweeting and indulging in lip sympathy. However, opposition ruled states remained non-committal on reducing Value-Added Tax. BJP-ruled Gujarat, Tripura and Chhattisgarh governments have also announced a similar reduction in oil prices. Global crude oil prices are linked to geopolity, fluctuation in the exchange rate as well as the tax structure of respective states and the Centre.
This year alone, petrol and diesel prices have been hiked by Rs 13.91 and Rs 15.59 respectively in the national capital. The way oil prices have been going up, there has been some adverse impact on the CAD. Of this, IOC's share would be roughly half and the rest split equally between HPCL and BPCL.
Global fuel prices, however, have been on the rise with the worldwide benchmark Brent crude nearing a four-year high of $86 per barrel earlier this week. But with a weakening rupee, it will likely have fewer options in the form of import-related tax cuts.
Nearly half of the fuel price is made up of taxes. However, in Mumbai, the diesel have gone up by 7 paise only. This means that petrol will continue to be expensive in Delhi. Brent crossed $86 per barrel and this is the highest in the last four years.