"The Government of India has made a decision to reduce the basic excise duty rate on petrol and diesel [both branded and unbranded] by Rs 2 per litre with effect from 4th October, 2017", a Finance Ministry statement said.
The new excise duty will be effective from tomorrow, October 4.
The finance ministry had too had earlier ruled out lowering excise duties on petroleum products, citing pressure on government finances.
"Excise duty cuts by the government are most welcome". Presently Petrol and diesel prices are revising on a daily basis.
Diesel price in Delhi retailed at Rs 59.14 before the excise cut.
Going by the statistics of October 2, the petrol and diesel prices in Delhi, itself had surged to Rs 70.83 per liter and Rs 59.07 per litre respectively, causing a huge hole in the pockets the commuters. While Maharashtra raised Value-Added Tax on petrol by Rs 3 a litre in end-April, Delhi hiked Value-Added Tax from 20 percent to 27 percent.
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A week before that Petroleum Minister Dharmendra Pradhan said that government can not change fuel prices on a knee-jerk basis and pitched GST as the "only way to have a rational price mechanism for petroleum products".
The re-balancing of the global oil price is a result of strong consumption and also due to efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to cut output by around 1.8 million barrels per day (bpd) in 2017 and the first quarter of next year.
"Modi government had increased excise duty on diesel from Rs 3.56 to Rs 17.33 and is now trying to fool people by reducing Rs 2 before Gujarat polls", said senior Congress leader Arjun Modhwadia.
The Modi government has been facing public condemnation for repeatedly hiking the prices of petrol and diesel even when the worldwide price for crude oil has been at an all time low. "We expect States too to match the price cut by lowering their taxes", said a senior government official.
Analysts says that Mahesh Nandakumar of CLSA stated that this move indicate the government is under political compulsions. and the the revenue reduction by Rs 13,000 crore can have an impact on the government's fiscal situation if the goods and tax (GST) collection does not pick up.
70% of total final retail prices of petrol and diesel are accounted by tax charges.