Explained: Why the government has reduced the duty on petrol and diesel, what will be the effect on the income of the states

You remember, just before Diwali last year, the government had decided to reduce the excise duty on petrol and diesel. Inflation was at its peak at that time as well. To overcome this, the government in November had reduced the excise duty on petrol by Rs 5 and on diesel by Rs 10. Its effect was seen in the form of a decrease in the CPI or inflation of consumer goods.

The Government of India took a big step on Saturday. Finance Minister Nirmala Sitharaman up to Rs 8 on petrol and Rs 6 on diesel excise duty ,Excise Duty) announced to reduce. Tax rules have been changed on many such commodities. This step of the government against the galloping inflation will bring a lot of relief. On one hand petrol-diesel (Petrol-Diesel PriceThe money of the general public will be saved in buying, on the other hand it will be easy to control inflation. However, the reduction in duty on the government’s front is not good news as the government will suffer a loss of 1 lakh crore annually due to reduced excise duty. The question is, why is the government reducing the excise duty after incurring such a huge loss. The answer lies in the inflation of flour-rice to salt-oil. If the prices of oils are not reduced, then the price of potatoes and onions will also increase so much that people will have to take to the streets against it.

Let us know why the government decided to reduce the duty on petrol-diesel and other commodities and what will be the effect on the state governments. The decision to reduce duty was not only for petrol and diesel, but similar tax cuts have been made on anthracite, PCI coal and cooking coal as well. With this reduction, the raw material of fuel sold in the local markets will be cheaper and people will get relief. The new rule of deduction of tax has come into effect from 22 May. However, in which province, how much rupees will be deducted, it will depend on the VAT there. Only then, while giving its decision, the Center urged the state governments to reduce their taxes.

why duty reduced

Excise duty is directly related to the Consumer Price Index or CPI. By reducing excise duty, there is a big reduction in inflation related to consumer goods. You remember, just before Diwali last year, the government had decided to reduce the excise duty on petrol and diesel. Inflation was at its peak at that time as well. To overcome this, the government in November had reduced the excise duty on petrol by Rs 5 and on diesel by Rs 10. Its effect was seen in the form of a decrease in the CPI or inflation of consumer goods. That move of the government reduced inflation by 30 basis points or 0.30 percent in the CPI. The recent decision of the government will also bring down the rate of inflation. Although its effect will not be seen immediately, but the rate cut will be seen in the coming months.

Why cut in the duty of petrol and diesel?

If it is said that petrol and diesel are at the root of every inflation, then there is no harm in it. Everything that reaches your home travels through transportation and transportation. If diesel is expensive, then the cost of goods simply increases. This inflation is because there is 40-50% tax on petrol and diesel per liter. Tax is divided by the central and state governments. It earns indiscriminately. This is the reason that the matter of increasing or decreasing the price of petrol and diesel is driven less by economics and more by politics. Only then, as soon as the Central Government reduced the excise duty, it became clear that the ball is now in the state governments’ court as to how much relief they give to the general public.

Where did the inflation rate reach?

Wholesale inflation has reached its record high of 15.08 percent and retail inflation at 7.79 percent. In this, the increased price of petrol-diesel and gas has a big role. A data for the month of March shows that 18.8 in oil, 11.6 in vegetables, 11.3 in footwear, 9.6 in meat and fish, 9.1 in clothes, 8.7 in personal care, 8.5 in spices, 8 in transport. There has been an increase of 7.7 percent in household items and 7.5 percent in food-drinks.

How much will the loss for the states

The price of petrol in Delhi had reached Rs 105.41. But after reducing the duty, its price has come down to Rs 95.91. Similarly, the diesel which was earlier selling at Rs 96.67 per liter, now its rate has gone up to Rs 89.67. In this way, the Delhi government will get Rs 9.5 less on petrol and Rs 7 less on diesel. Petrol in Mumbai was Rs 111.35, but now it has come down to Rs 97.28. Petrol in Chennai is being sold for Rs 102.65 and diesel for Rs 94.24 a liter. The price of petrol in Kolkata is Rs 106.03 and the price of diesel is Rs 92.76. In Bangalore, a liter of petrol will cost Rs 101.94 and a liter of diesel will cost Rs 87.89.

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The Kerala government has announced a reduction in the prices of petrol and diesel by Rs 2.41 and Rs 1.36 per liter respectively, following the reduction in fuel price by the Centre. Similarly, the Rajasthan government reduced VAT on petrol by Rs 2.48 per liter and on diesel by Rs 1.16 per liter. Odisha government has also reduced the tax on petrol and diesel by Rs 2.23 and Rs 1.36 per liter respectively, the new price of fuel in Odisha will be Rs 102.25 and Rs 94.86 respectively.

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