Petrol prices cut by ₹5, diesel rates down ₹10 per litre across India

Diwali may bring some degree of relief for commuters in the country as the central government late Wednesday decided to cut levies it imposes on petrol by ₹5 per litre and by ₹10 per litre on diesel. Petrol and diesel prices have been touching record highs almost regularly and while the decision to cut levies does come as a welcome move, prices of both fuels will still remain significantly higher than what these were just a few short months ago.

The price of petrol and diesel in India is determined by a wide variety of factors such as rate of crude in the international market and conversion rates against US Dollar. But a large chunk of the final price charged to the end customer is made up by taxes and levies imposed by both the central as well as state governments. Rising prices have not emerged as a major concern for motorists but for people at large because high fuel prices tend to cause inflationary pressures. “The decision (to cut levies on petrol and diesel) was announced immediately after the Prime Minister gave his nod to providing relief to consumers, tame inflation and boost growth," an official was quoted as saying by Hindustan Times.

The new rates of petrol and diesel are effective from Thursday and would vary from state to state owing to difference in how each state government imposes tax. The union finance ministry, however, urged states to also consider cutting back on these. “States are also urged to commensurately reduce VAT (value-added tax) on petrol and diesel to give relief to consumers," a statement from the ministry read.

A few states were quick to respond. Assam, Goa and Tripura announced cut in taxes imposed on both fuels. It is expected that several others states will now announce similar cuts which could further bring down prices.

Petrol and diesel rates have been on a record high run with no sign of either halting or climbing down. One of the reasons cited is the rising price of crude in the international market while others have cited the need for revenue for welfare schemes of the central government. Critics and many economists, however, say high fuel prices have a detrimental impact on not just household budget but the economy as a whole.