"The government's aim is to give relief to the consumer by increasing their purchasing power without impacting the fiscal deficit", he said. "So, a total of Rs 2.50 will be reduced on both diesel and petrol", said Jaitely.
In a tweet, Gujarat Chief Minister Vijay Rupani announced that "the government of Gujarat has made a decision to cut Rs 2.50 on both petrol and diesel".
While the decisions by the BJP-ruled states was expected, there was also a near immediate refusal by non-BJP states to cut fuel rates.
Thanking Prime Minister Narendra Modi and Union Finance Minister Arun Jaitley, Fadnavis said the reduction in fuel prices will give a huge relief to citizens. Jaitley said he on Wednesday met Oil Minister Dharmendra Pradhan and inter-ministerial consultations continued on Thursday. Jaitley further said that the ruling party and oil firms will deal with the price reduction by Rs 1.50 and Rs 1 respectively.
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Jaitley said the decision to give relief to consumers was necessitated by the uncertainty regarding the worldwide oil prices and was made possible by better-than-expected revenue collections. Rupani also announced that petrol and diesel would be cheaper by Rs 5 cheaper in Gujarat.
The share prices of oil marketing companies like Hindustan Petroleum Corporation Ltd plunged immediately, down by as much as 12% in initial trading after Jaitley's remarks.
Speaking on the reason for price cut, the Finance Minister said that there has been a significant impact of higher interest rates in the USA and crude oil prices on rising fuel prices in the country.
Diesel is being sold at Rs 75.45 per litre in New Delhi, Rs 79.79 per litre in Chennai and Rs 77.30 per litre in Kolkata. Rajasthan, Andhra Pradesh and Karnataka are among the handful of states which have reduced Value-Added Tax.
"So the impact will be Rs 10,500 crore in current fiscal which is only 0.05 per cent of fiscal deficit".
The minister also maintained that Thursday's decision did not represent a re-regulation of fuel prices.