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Did Modi Govt Step Back On Its Stand of Fuel Prices?

Under fire from opposition along with general public, Modi government appears to have stepped back from its previous stand on essential fuel prices like petrol and diesel. The government had been of the view that it was necessary not to decrease taxes on fuel as the money collected this way is used for funding several public welfare and infrastructure projects.

Even as the mounting fuel prices in recent weeks badly affected businesses and the general people across the country, oil minister Dharmendra Pradhan was optimistic for that prices would ease out and the government didn’t appear in a mood to cut down taxes, despite protests. On September 20, Finance Minister Arun Jailtey had ruled out cutting down taxes. “We need excise revenues to push public investment, and if any state wants to reduce excise they can do so,” Jaitley had said.

While the government remained adamant on its stand, fuel prices touched a three-year high since Modi government came to power. Just before petrol was about to reach Rs 80, the government, however, corrected itself by cutting basic excise duty on petrol and diesel by Rs 2 per litre – a move that is being described as a relief to the common man.

The Central Board of Excise and Customs said on Tuesday, 4th October, that basic excise duty on these fuel has been reduced “To cushion the impact of rising international prices of crude petroleum oil and petrol and diesel on Retail Sale Prices of petrol and diesel… and to protect the interest of common man.”

This is also the first time when Modi-led NDA government has condensed excise duty after raising it 11 times since November 2014. Having raised the excise duty on so many occasions, a mere reduction of Rs 2 is not a huge respite for the common man.

It can be said the government is receptive but it is clear that the Centre has not only acted late but also climbed down from its own stand (of using tax collection for development) and taken a political decision as elections in crucial states like Gujarat and Karnataka come closer.

Despite the democratic move, the government has confirmed to not to affect oil manufacturing companies (OMCs). Earlier, Union minister Pradhan had refused to interfere in day-to-day functioning of OMCs. The government would now have bear a revenue loss of Rs 13,000 crore due to excise duty cut.

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