Petrol diesel price cut | Photo Credit: BCCL

New Delhi: Finance Minister Arun Jaitley on Thursday addressed rising concerns over rising prices of global crude oil and continued depreciation of the rupee, which is now trading beyond the Rs 73-mark against the US dollar. In what seems to be a major relief, FM Jaitley announced that the centre has approved a cut of Rs 1.50 on excise duty for crude oil and an additional Re 1 will be absorbed by OMCs with immediate effect.

"Excise duty to be reduced by Rs.1.50 & OMCs will absorb 1 rupee. So, a total of Rs.2.50 will be reduced on both diesel and petrol," he said. He went on to add that the impact of the excise duty cut will cost Rs 10,500 crore this year.

#BREAKING | Relief for the consumers as Finance Minister @ArunJaitley announces Rs 1.5/ltr excise duty cut, Here is the break up of total relief which will come to about Rs 5/ltr.#ExciseDutyCut #Petrol #Diesel pic.twitter.com/2ucryPPVzf — ET NOW (@ETNOWlive) October 4, 2018

In addition, Jaitley said he would write to states to absorb an equivalent amount i.e. Rs 2.50 VAT to reduce the pressure on citizens. It may be noted that some states have already lowered the VAT to control the rising oil prices. If the states agree to deduct Rs 2.50/litre, then a Rs 5 relief on fuel prices can be expected in every state.

"We are writing to the state govts that as the central govt is cutting Rs 2.50 on both petrol & diesel, they do the same," he said.

Soon after the finance minister's announcement, Gujarat and Maharashtra government announced a cut of Rs 2.50 per litre in VAT rates on petrol and diesel. This essentially means that people in the state of Maharashtra and Gujarat will get a Rs 5 per litre relief in petrol and diesel prices.

Finance Minister Sh @arunjaitley Ji has announced Rs.2.5 cuts in petrol & diesel prices, reciprocating positively to FM’s announcement, the Govt Of Gujarat has also decided to reduce Rs.2.50 on both petrol & diesel. Thus petrol & diesel wd be Rs. 5 cheaper in the State of Gujarat — Vijay Rupani (@vijayrupanibjp) October 4, 2018

Maharashtra Government also decided to give additional relief of ₹2.5/litre on Petrol to give total benefit of ₹5/litre in the State of Maharashtra. — Devendra Fadnavis (@Dev_Fadnavis) October 4, 2018

Meanwhile, Kerala Finance Minister Thomas Isaac said the state government is unlikely to cut VAT by Rs 2.50 per litre as it had already reduced it by Rs 2 per litre earlier. A similar point was raised by Karnataka Chief Minister HD Kumaraswamy. He, too, said that the state had cut Rs 2 per litre VAT on fuel earlier, indicating that the state government will not pass another deduction in VAT rate.

Jaitley's announcement will provide much-needed relief to the citizens who have been bearing the burden of rising fuel prices. However, it came as a shock to OMCs such as ONGC, HPCL and Indian Oil Corp, whose shares slid post the announcement.

#BREAKING | Sharp drop in OMCs stock price after Finance Minister Arun Jaitley announces that the OMCs will cut fuel prices by Re1/litre. Indian Oil stock price drops 17% @IndianOilcl #ExciseDutyCut #Petrol #Diesel @arunjaitley pic.twitter.com/a6amkrEUTr — ET NOW (@ETNOWlive) October 4, 2018

Soon after the announcement, BSE Sensex nosedived to close at 35,169.16, falling 806.47 points as oil companies witnessed a major shock; even Nifty failed to hold 11,600 points.

It may be noted that today's riot in the stock market was triggered by a steep surge in global crude oil prices It may be noted that Brent Crude oil was trading at $86.15 per barrel and has currently touched a four-year high.

During the press conference, Jaitley cited concerns of rising Brent Crude oil prices and the US interest rates which have inched to 3.2 per cent. He added that it has had a significant impact on global markets including India, adding that the government has announced a slew of programmes to address concerns over rupee's depreciation.

Apart from the main announcement, he also past counted steps that were taken by the government to address the IL&FS crisis, which has been denting the stock market for the past two weeks.

FM Jaitley explained that instability in international factors are mainly responsible for the recent rise in oil prices but added that the internal macroeconomic factors are heading in a stable direction.

He said, "Several macroeconomic data is indicating stable measures. The first quarterly results have shown an 8.2% growth. Inflation is still moderate less than 4%."

Read: Sensex extends fall, sinks 850 points; RIL leads selloff, plunges over 7%

It may be noted that the falling rupee has spooked investors on D-Street, triggering a heavy sell-off in the afternoon session, with BSE Sensex falling as much as 850 points to 35,116.82. The 50-share NSE Nifty also fell below the sensitive 10,600-mark.

It may be noted that the sell-off was led by Reliance Industries Limited, which fell over 7 per cent to an intraday low of Rs 1,118.55. As of 14:48 pm, Sensex has been hovering around the 35,340-mark and is down by almost 630 points. By the end of today's trading session, Sensex shed 806 points to register one of its biggest intraday falls in 2018; Nifty also failed to hold the sentimentally strong 10,600-mark.

However, the prime reason behind today’s dip in the stock market has been attributed by experts to the rupee’s plunge beyond the sentimental 73-mark after a 15 per cent fall throughout the year. A bearish tone among global markets also impacted the Indian stock market indices, added analysts.

On Wednesday, Union Oil Minister Dharmendra Pradhan met FM Jaitley to consider options for mitigating the pressure rising due to an incessant spike in oil prices. The two ministers reportedly discussed ways to reduce the burden on rising oil prices in the country.

Related: Oil Minister Dharmendra Pradhan meets Finance Minister Arun Jaitley as fuel prices touch new high

It may be noted that yesterday's farmers' protest also seems to be a trigger which got the government thinking about the aforementioned measure. It is worth mentioning that petrol prices today rose 15 paise to hit an all-time high of Rs 84 per litre in Delhi while diesel prices were hiked by 20 paise, taking its rate to Rs 75.45 per litre in the national capital.