Central Government has finally made a decision to stop the arrest of increasing Fuel Prices. According to reports, Karnataka Chief Minister HD Kumaraswamy said that the state government will not reduce prices anymore since it has already announced a rate cut. "The state government this evening announced matching cut of Rs 2.50 per litre in fuel prices commensurate with the price cut of Rs 2.50, announced by the central government earlier today", an official spokesman said.
The Finance Minister said, however, that the higher oil prices were not the only factor that prompted the decision: India was also getting hit by higher USA interest rates, although he added that only the country's current account deficit was swelling under the twin pressure of prices and rates, while the national fiscal deficit was enjoying the positive effects from direct tax collection rates.
"The government's aim is to give relief to the consumer by increasing their purchasing power without impacting the fiscal deficit", he said.
The minister also maintained that Thursday's decision did not represent a re-regulation of fuel prices. In a tweet he said, "Madhya Pradesh has also reduced VAT [Value Added Tax] on fuel as a result of which the people will get a relief of Rs 5".
She said that the Centre can dictate the BJP-ruled states but not the others. Jaitley had also urged the state governments to cut the Value-Added Tax on fuel by an equal amount.
"India's domestic indicators were consistent and encouraging", the Finance Minister said.
The central government had incrementally taxed the fuels when the global crude prices had hit an all-time low to generate revenues for the state in order to rein in the fiscal deficit.
Except the Current Account Deficit (CAD), which is directly linked to oil prices, all other data are encouraging, he said.
Former finance minister P Chidambaram termed the decision as "tokenism".
Oil Marketing Companies (OMCs) have hiked the prices of petrol and diesel by Rs 7.58 per litre and Rs 8.10 per litre since 1 August.
However the opposition-ruled states refused to toe the Centre's line. Brent, the benchmark for more than half the world's oil, is trading at a four-year high of over United States dollars 84 per barrel.
Thank you Hon PM @narendramodi ji and Union Minister @arunjaitley ji for reducing ₹2.50/litre on both Diesel and Petrol.