Fuel prices cut to cost Rs 1 lakh crore to exchequer

A worker holds a nozzle to pump petrol into a vehicle at a fuel station in Mumbai, India, May 21, 2018. File Photo: REUTERS/Francis Mascarenhas

New Delhi: The spiralling price rise has forced the Central government to cut the excise duty on petroleum products and address the crisis in the construction sector.

The Reserve Bank's Monetary Policy Committee hiking the repo rate by 40 basic points to 4.40 per cent earlier this month was a prelude to the government intervention to keep the price rise under control.

The Centre had slashed the tax on petroleum products in November last, but States such as Kerala, Andhra Pradesh, Tamil Nadu and West Bengal refused any cut on excise duty.

The Centre has already made it known that price rise – the highest in eight years – could be controlled only with the co-operation of the States.

Inflation, based on the consumer price index, shot up to 7.70 per cent in April, even as the cost of food increased 8.39 per cent year-on-year in April 2022.

Though the international market witnessed a spike in petroleum products post-November 2021, the hike was not implemented in India in the light of Assembly elections in five States, including Uttar Pradesh. Petroleum companies increased the price after the elections in March.

Gujarat and Himachal Pradesh are going to Assembly polls later this year. The BJP's brainstorming session held at Jaipur in Rajasthan, however, demanded strong and effective government-level intervention to arrest price rise.

The Central government has been holding the war in Ukraine responsible for the current crisis. The war sparked a price rise across the world. It is in this backdrop that the government decided to implement price-control measures.

Union Finance Minister Nirmala Sitharaman said the price arresting measures would cause an estimated loss of Rs 1 lakh crore to the exchequer.

The markets too felt the impact of price rise that has been stifling the ordinary man. Several companies cut down production as the sales dipped. Automobile market too felt the slump. The finance minister herself said the other day that the crisis in the construction sector will impact the government also.

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