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Updated: Oct 05, 2018 09:58 IST

After Finance Minister Arun Jaitley announced that the Centre was reducing fuel prices by Rs 2.5 per litre, BJP-ruled states are announcing additional cuts. Eleven of the 19 states where the party is in power announced matching cuts within four hours of the Finance Minister’s announcement.

Petrol and diesel will be five rupees cheaper per litre in various BJP-ruled states as they cut an additional Rs 2.5 on the fuels.

The Congress has mocked it as a “panic reaction ahead of elections”.

Union finance minister Arun Jaitley had said he would write to states to ask them to make a matching reduction. NDA ruled states didn’t wait for his letter. Maharashtra and Gujarat first announced they too were reducing prices by Rs 2.5 per litre, others soon followed.

Jharkhand, Tripura, Madhya Pradesh, Uttar Pradesh, Rajasthan, Chhattisgarh, Himachal Pradesh, Haryana, Goa, Arunachal Pradesh and Assam have also made the announcement.

There has been no offer to cut taxes in opposition-ruled states.

It is an eventuality that the BJP had expected. Jaitley had emphasised that when the centre cut central taxes on fuel in October last year, only states ruled by the BJP-led NDA had announced matching cut in state taxes.

“Now all states will be on test... Will have to see what states where leaders were indulging in lip sympathy and tweeting, what would these states do,” Jaitley said.

BJP chief Amit Shah called the price cut as another decision in public interest by the Modi government. “All the BJP-ruled states have also decided to reduce VAT by Rs.2.50 per litre on petrol and diesel prices,” he said.

The Congress did not comment how opposition states would respond to the centre’s appeal. It recalled that non-NDA states such as Karnataka, Andhra Pradesh and Bengal had already reduced taxes just last month.

Congress’ Randeep Singh Surjewala, who described the Rs 2.5 cut as a panic reaction against, said in the last 52 months, Surjewala said, excise duty on petrol had gone up from Rs 9.23 per litre to Rs 19.48 and for diesel, from Rs 3.46 to Rs 9.23.

“Facing public ire and imminent defeat in five election-going states, the government has attempted to apply band-aid after inflicting a thousand wounds by massive profiteering through excise duty,” said Surjewala.

Jaitley didn’t refute a suggestion that the price cut was driven by politics.

“If reducing oil prices is good politics, so be it,” he said. Five states including three where the BJP is in power, are set to have elections later this year.

But the finance minister took pains to stress that it wasn’t bad economics.

“This is perfectly good economics... we want consumers to spend money on other items also... to do it without impacting the fiscal deficit is surely good economics,” he announced after an inter-ministerial discussion with petroleum ministry.

He insisted that telling oil marketing companies to absorb Re 1 didn’t imply going back on deregulation of prices. “But the fact is that we have to react to a situation...if without impacting the fiscal deficit I can give relief, and I had always said that our ability to give relief will not be at the cost of fiscal deficit,” he said.

Jaitley said the move followed Brent crude oil touching four-year high of USD 86 a barrel Wednesday and interest rates in US reaching seven-year high.

Inflation in India, however, is still moderate at less than 4 per cent and higher direct tax collections give comfort with regard to fiscal deficit, he said adding domestic macroeconomic indicators are strong and stable, except for current account deficit.