India cuts petrol, diesel prices to offset oil rise, rupee losses

NEW DELHI (Reuters): India cut the retail prices of petrol and diesel by Rs. 2.50 ($ 0.034) per litre, Finance Minister Arun Jaitley said on Thursday, the Government’s latest step to tackle a sharp hike in crude oil prices and the impact of a weak rupee.

The cut is a result of a reduction in the excise duty of Rs. 1.50 per litre with oil marketing companies taking a revenue hit of Rs. 1 per litre, he said.

Jaitley also asked state governments to cut the value added tax on fuel by a further Rs. 2.50 per litre. “I hope all state governments do this, and they announce this so that consumers benefit by Rs. 5,” he told reporters.

The Nifty Energy Index fell 6.14% lower on Thursday in reaction to the news.

Shares in Indian Oil Corp, the country’s biggest oil refiner, dropped 11.4%. Hindustan Petroleum Corp closed down 13.5% while Bharat Petroleum Corp Ltd fell 12.4%. Reliance Industries shares closed down 6.9%, their biggest single-day fall since Aug. 24, 2015.

Taxes on petrol and diesel, which account for more than a third of retail fuel prices, are one of the biggest sources of income for the government, and a sensitive issue for voters.

Modi’s ruling party is facing a tough election in three key states this year followed by a national election due by May.