New Delhi: In a significant decision, the Centre on Wednesday reduced excise duty on petrol and diesel to bring down the prices of the two petroleum products which had been seeing an upward trend.
The relief to consumers came on the eve of Diwali. The Finance Ministry said that excise duty on petrol will come down by Rs 5 and that on diesel by Rs 10 and it will be effective from Thursday.
It urged the states "to commensurately reduce" VAT on petrol and diesel to give relief to consumers.
A Finance Ministry release said that reduction in excise duty on petrol and diesel will boost consumption, keep inflation low and the decision is expected to further spur the overall economic cycle.
"To give a further fillip to the economy, the Government of India has decided to significantly reduce the excise duty on diesel and petrol.
The reduction in excise duty on petrol and diesel will also boost consumption and keep inflation low, thus helping the poor and middle classes. Today's decision is expected to further spur the overall economic cycle," the Ministry said.
The ministry said that reduction in excise duty on diesel will be double that of petrol and "will come as a boost to the farmers" during the upcoming Rabi season.
"The Indian farmers have, through their hard work, kept the economic growth momentum going even during the lockdown phase and the massive reduction in excise on diesel will come as a boost to the farmers during the upcoming Rabi season," the release said.
The ministry said that crude oil prices have witnessed a global upsurge in recent months and "consequently, domestic prices of petrol and diesel had increased in recent weeks exerting inflationary pressure".
"The world has also seen shortages and increased prices of all forms of energy. The Government of India has made efforts to ensure that there is no energy shortage in the country and that commodities such as petrol and diesel are available adequately to meet our requirements," it said.
The ministry said that the Indian economy has witnessed a remarkable turnaround post the COVID-19 induced slowdown driven by the enterprising ability of India's aspirational population.
"All sectors of the economy - be it manufacturing, services or agriculture - are experiencing significant upward economic activity," the ministry said.